APPROVED, WITH CERTAIN CONDITIONS: (1) THE ACQUISITION OF CONTROL OF CONRAIL INC. AND CONSOLIDATED RAIL CORPORATION (COLLECTIVELY, CONRAIL), BY (A) CSX CORPORATION AND CSX TRANSPORTATION, INC. (COLLECTIVELY, CSX), AND (B) NORFOLK SOUTHERN CORPORATION AND NORFOLK SOUTHERN RAILWAY COMPANY (COLLECTIVELY, NS); AND (2) THE DIVISION OF THE ASSETS OF CONRAIL BY AND BETWEEN CSX AND NS.

The Board approves, with certain conditions: (1) the acquisition of
control of
Conrail Inc. and Consolidated Rail Corporation (collectively, Conrail) by (a)
CSX
Corporation and CSX Transportation, Inc. (collectively, CSX), and (b) Norfolk
Southern Corporation and Norfolk Southern Railway Company (collectively, NS);
and (2) the division of the assets of Conrail by and between CSX and NS.

Applicants. By application (sometimes referred to as the primary
application) filed
June 23, 1997, CSX Corporation (CSXC), CSX Transportation, Inc. (CSXT),
Norfolk Southern
Corporation (NSC), Norfolk Southern Railway Company (NSR), Conrail Inc. (CRR),
and
Consolidated Rail Corporation (CRC)(3) seek
approval under 49 U.S.C. 11321-25 for: (1) the
acquisition by CSX and NS of control of Conrail; and (2) the division of
the assets of Conrail by
and between CSX and NS. By various ancillary filings also filed June 23, 1997,
applicants seek
approval for or exemption of various ancillary control-related matters.(4)

Parties Supporting The Application. The application has been
endorsed by more than
2,700 parties, including more than 2,200 shippers, more than 350 public
officials, and more than
80 railroads. See Application Volumes 4A, 4B, 4C, 4D, 4E, 4F, and
4G.(5)

Protestants: Passenger Railroads. Submissions opposing the
CSX/NS/CR transaction
and/or urging the imposition of conditions have been filed by the National
Railroad Passenger
Corporation (NRPC or Amtrak), the American Public Transit Association (APTA),
the
Commuter Rail Division of the Regional Transportation Authority of Northeast
Illinois (referred
to as Metra or, on occasion, Chicago Metra), Metro-North Commuter Railroad
Company
(MNCR), the METRO Regional Transit Authority (referred to as METRO or, on
occasion,
Northeast Ohio METRO),(10) the Northern
Virginia Transportation Commission (NVTC), and the
Potomac and Rappahannock Transportation Commission (P&RTC).(11) The evidence and
arguments, and any related requests for affirmative relief, contained in these
submissions are
summarized in Appendix D.

Protestants: Shipper Organizations. Submissions opposing the
CSX/NS/CR transaction
and/or urging the imposition of conditions have been filed by The National
Industrial
Transportation League (NITL), the U.S. Clay Producers Traffic Association, Inc.
(CPTA), The
Fertilizer Institute (TFI),(12) the Chemical
Manufacturers Association (CMA), The Society of the
Plastics Industry, Inc. (SPI),(13) the
Institute of Scrap Recycling Industries, Inc. (ISRI), the
American Farm Bureau Federation (AFBF), the American Feed Industry Association
(AFIA), the
National Cattlemen's Beef Association (NCBA), the National Corn Growers
Association
(NCGA), the National Pork Producers Council (NPPC),(14) the National Grain and Feed
Association (NGFA), and the National Mining Association (NMA). The evidence and
arguments, and any related requests for affirmative relief, contained in these
submissions are
summarized in Appendix E.

Regional/Local Interests In The Northeast (New York, Pennsylvania,
New Jersey, and
New England). Submissions respecting the CSX/NS/CR transaction have been
filed by: the
State of New York, acting by and through its Department of Transportation
(NYDOT); the New
York City Economic Development Corporation (NYCEDC), acting on behalf of the
City of
New York;(18) United States Representative
Jerrold Nadler and 23 other Members of the United
States House of Representatives (referred to collectively as the Nadler
Delegation);(19) the
Erie-Niagara Rail Steering Committee (ENRSC); the Genesee Transportation
Council (GTC);
the Tri-State Transportation Campaign (TSTC); the Business Council of New York
State,
Inc. (BCNYS); the Empire State Passengers Association (ESPA); the Southern
Tier West
Regional Planning and Development Board (STWRB); the Northwest Pennsylvania Rail
Authority (NWPRA); the Eight State Rail Preservation Group (ESRPG); the
Pennsylvania House
and Senate Transportation Committees (referred to collectively as the
Pennsylvania
Transportation Committees); United States Senator Arlen Specter of
Pennsylvania; the Delaware
Valley Regional Planning Commission (DVRPC); the Southwestern Pennsylvania
Regional
Planning Commission (SPRPC); the Philadelphia Regional Port Authority (PRPA),
the South
Jersey Port Corporation (SJPC), The Delaware River Port Authority (DRPA), and
The Port of
Philadelphia and Camden, Inc. (PPC);(20) the
Commonwealth of Pennsylvania, Governor Thomas
J. Ridge, and the Pennsylvania Department of Transportation (referred to
collectively as
PADOT); the City of Philadelphia and the Philadelphia Industrial Development
Corporation
(referred to collectively as PIDC); United States Representative Robert
Menendez of
New Jersey; the Village of Ridgefield Park, New Jersey; the South
Jersey Transportation
Planning Organization (SJTPO); the Coalition of Northeastern Governors (CNEG);
the
Connecticut Department of Transportation (CTDOT); the Rhode Island
Department of
Transportation (RIDOT); United States Senator Jack Reed of Rhode Island; the
Commonwealth
of Massachusetts; the State of Vermont; the Maine Department of Transportation
(MEDOT); and
the Conservation Law Foundation (CLF). The evidence and arguments, and any
related requests
for affirmative relief, contained in these submissions are summarized in
Appendix I.

Regional/Local Interests In The Mid-Atlantic States (Maryland,
Delaware, and
West Virginia). Submissions respecting the CSX/NS/CR transaction
have been filed by:
Baltimore Area Transit Association (BATA), the Citizens Advisory Committee for
the Baltimore
region (CAC), the State of Delaware Department of Transportation (DEDOT), the
West Virginia
Association for Economic Development (WVED),(21) and the West Virginia State Rail Authority
(WVSRA). The evidence and arguments, and any related requests for affirmative
relief,
contained in these submissions are summarized in Appendix J.

Regional/Local Interests In The Midwest (Ohio, Indiana, and
Illinois). Submissions
respecting the CSX/NS/CR transaction have been filed by: the Ohio Attorney
General (OAG),
the Ohio Rail Development Commission (ORDC), and the Public Utilities
Commission of Ohio
(PUCO);(22) the City of Cleveland, OH; the
Cities of Bay Village, Rocky River, and Lakewood,
OH (referred to collectively as the BRL Cities);(23) United States Representative Dennis J.
Kucinich of Ohio; the Summit County Port Authority (SCPA);(24) the Stark Development Board,
Inc. (SDB); the City of Cincinnati, OH; the Toledo-Lucas County Port Authority
(TLCPA); the
Toledo Metropolitan Area Council of Governments (TMACOG); the Four City
Consortium
(FCC, an association of the Cities of East Chicago, Hammond, Gary, and
Whiting, IN); the City
of Indianapolis, IN; the Indiana Port Commission (IPC); the Parks and
Recreation Department of
St. Joseph County, IN; the Illinois International Port District (the Port of
Chicago); the Illinois
Department of Transportation (ILDOT); the Village of Riverdale, IL; the City of
Georgetown,
IL; and the Environmental Law & Policy Center of the Midwest (EL&PC).
The evidence and
arguments, and any related requests for affirmative relief, contained in these
submissions are
summarized in Appendix K.

Labor Parties. Submissions respecting the CSX/NS/CR transaction
have been filed by
various labor parties, including the Allied Rail Unions (ARU), the
International Association of
Machinists and Aerospace Workers (IAM), the TransportationCommunications
International
Union (TCU), Transportation Trades Department (TTD),(25) the United Railway Supervisors
Association (URSA), and the United Transportation Union (UTU). The evidence
and arguments,
and any related requests for affirmative relief, contained in these submissions
are summarized in
Appendix L.

Federal Parties. Submissions have also been filed by the United
States Department of
Agriculture (USDA), the United States Department of Justice (DOJ), and the
United States
Department of Transportation (DOT). The evidence and arguments, and any
related requests for
affirmative relief, contained in these submissions are summarized in Appendix M.

Additional Parties. Numerous additional parties, including
elected officials, government
agencies, shippers, shortline railroads, and labor organizations, have
participated in this
proceeding. Their submissions have generally been limited to expressions of
either support for
or opposition to either the CSX/NS/CR transaction or the conditions requested
by one or more of
the parties urging the imposition of conditions upon any approval of the
transaction.

Summary of Decision. In this decision, we are taking the
following action: (1) except as
otherwise indicated, we are approving the primary application in its
entirety;(26) (2) with certain
limited restrictions, we are approving applicants' request to override
antiassignment and other
similar clauses in shipper contracts, but only for a period of 180 days from
Day One;(27) (3) with
one exception, we are approving applicants' request to override antiassignment
and other similar
clauses in Conrail's Trackage Agreements;(28)
(4) we are exempting the transactions at issue in the
Sub-Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20,
21, 22, 23, 24, 25, 27,
28, 29, 30, 32, 33, and 34 dockets;(29) (5) we
are granting the application in the Sub-No. 26 docket;
(6) we are requiring applicants to give 14 days' prior notice to the Board
and the public of the
date that will be designated as Day One; (7) we are imposing as conditions, but
with certain
modifications, the terms of the NITL agreement;(30) (8) we are imposing as conditions the terms of
the settlement agreements that applicants entered into with certain parties;
(9) we are requiring
CSX to participate in New York City's Cross Harbor Freight Movement Major
Investment Study
in order to assess the feasibility of upgrading cross-harbor float and tunnel
operations to facilitate
cross-harbor rail movements; (10) we are requiring CSX to negotiate an
agreement with CP(31) to
grant CP either haulage rights unrestricted as to commodity and geographic
scope, or trackage
rights unrestricted as to commodity and geographic scope, over the Conrail line
that runs
between Selkirk (near Albany) and Fresh Pond (in Queens), under terms agreeable
to the parties,
taking into account the investment that needs to continue to be made to the
line;(32) (11) we are
requiring CSX to make, by October 21, 1998, an offer to the City of New York to
establish a
committee intended to develop ways to promote the development of rail traffic
to and from the
City, with particular emphasis on Conrail's Hudson Line, as well as ways to
address the City's
goals of industrial development and the reduction of truck traffic that is
divertible to rail
movement, and CSX's goals to provide safe, efficient, and profitable rail
freight service; (12) we
are requiring CSX to discuss with P&W the possibility of expanded P&W
service over trackage
or haulage rights on the line between Fresh Pond, NY, and New Haven, CT,
focusing on
operational and ownership impediments related to service over that line; (13)
we are requiring
applicants to monitor origins, destinations, and routings for the truck traffic
at their intermodal
terminals in Northern New Jersey and in Massachusetts in a manner that would
permit the
determination of whether the transaction has led to substantially increased
truck traffic over the
George Washington Bridge; (14) we are requiring the application of the $250
maximum
reciprocal switching charge provided for in the NITL agreement to certain
points in the Niagara
Falls area for traffic using International Bridge and Suspension Bridge, for
which Conrail
recently replaced its switching charges with so-called "line haul" charges;
(15) we are requiring
that CSX's trackage rights over a line of the former Buffalo Creek Railroad be
transferred to NS;
(16) we are initiating a 3-year rate study to assess whether Buffalo-area
shippers have been
subjected to higher rates because of the CSX/NS/CR transaction; (17) we are
requiring CSX to
meet with regional and local authorities in the Buffalo area to establish a
committee for the
development of rail traffic to and from that area; (18) we are requiring CSX to
adhere to its
agreements with CN and CP that provide for lower switching fees in the Buffalo
area; (19) we
are requiring CSX to adhere to its representation regarding investment in new
connections and
upgraded facilities in the Buffalo area; (20) we are granting the responsive
application filed by
LAL to the extent necessary to permit LAL to cross Conrail's Genesee Junction
Yard to forge a
connection with NS via a short movement on the Rochester & Southern
Railroad (R&S); (21) we
are imposing a condition that will ensure that the effects of the "blocking"
provisions to which
certain shortlines, such as the RBMN, are subject are not given greater force
as a result of the
CSX/NS/CR transaction; (22) we are requiring CSX to grant NECR trackage rights
between
Palmer, MA, and West Springfield, MA, to facilitate joint-line movements with
NECR's affiliate,
Connecticut Southern Railroad, Inc. (CSO); (23) we are directing CSX to meet
with IC to
attempt to resolve their dispute regarding a dispatching plan for the short
segment of CSX's
Memphis line over which IC has trackage rights;(33) (24) we are requiring applicants (a) to grant
Wheeling & Lake Erie Railway Company (W&LE) overhead haulage or
trackage rights access to
Toledo, OH, with connections to AA and other railroads at Toledo, (b) to extend
W&LE's lease
at, and trackage rights access to, NS' Huron Dock on Lake Erie, and (c) to
grant W&LE overhead
haulage or trackage rights to Lima, OH, with a connection to the Indiana &
Ohio Railway
Company (IORY) at Lima; (25) we are also requiring applicants to negotiate with
W&LE
concerning mutually beneficial arrangements, including allowing W&LE to
provide service to
aggregates shippers or to serve shippers along CSX's line between Benwood and
Brooklyn
Junction, WV; (26) we are imposing a condition intended to ensure that AA's
quality interline
service under its new Chrysler contract is continued and that this contract is
not undermined;
(27) we are affirming that our approval of the CSX/NS/CR transaction will
not preempt the Belt
Line Principle advocated by PBL; (28) we are requiring that IP&L be given
the choice of having
its Stout plant served by NS directly or via switching by Indiana Rail Road
Company (INRD),
and we are further requiring the creation of an NS/ISRR interchange at MP 6.0
on ISRR's
Petersburg Subdivision along with conditional rights for either NS or ISRR to
serve any build-out to the Indianapolis Belt Line; (29) we are requiring that
Conrail's trackage rights on the NS
line between Keensburg, IL, and Carol, IN, be transferred to CSX rather than
NS;(34) (30) we are
imposing a condition intended to assure the preservation of the build-out
option that JS&S now
has at its Capital Heights, MD, scrap metal processing facility; (31) we
are requiring applicants
to consult with ASHTA concerning the routing of its hazardous materials
shipments; (32) we are
directing applicants to discuss with the Port of Wilmington any problems
concerning switching
services and charges, and to report back to the Board by September 21, 1998;
(33) we are
exempting the several abandonments and the one discontinuance proposed by
applicants in the
abandonment dockets; (34) we are imposing the standard labor protective
conditions as further
discussed;(35) (35) we are directing CSX and NS
to meet with labor representatives and to form
task forces for the purpose of promoting labor-management dialogue concerning
implementation
and safety issues; (36) we are imposing an operational monitoring
condition, and, in connection
therewith, we are requiring CSX, NS, and Conrail to file periodic status
reports and progress
reports; (37) we are imposing certain environmental mitigating conditions;
(38) we are
establishing oversight for 5 years so that we may assess the progress of
implementation of the
CSX/NS/CR transaction and the workings of the various conditions we have
imposed,(36) and we
are retaining jurisdiction to impose additional conditions if, and to the
extent, we determine that
additional conditions are necessary to address harms caused by the CSX/NS/CR
transaction; and
(39) we are denying all other conditions heretofore sought by the various
parties to this
proceeding.(37)

THE PRIMARY APPLICATION AND RELATED FILINGS

APPLICANTS. CSX operates approximately 18,504
route miles and 31,961 track miles
of railroad in 20 states east of the Mississippi River and in Ontario, Canada.
Of that total,
approximately 1,607 miles are operated under trackage rights while the
remaining mileage is
either owned by CSX or operated by CSX under contract or lease. CSX has
principal routes to,
and serves, virtually every major metropolitan area east of the Mississippi
River, from
Chicago, IL, St. Louis, MO, Memphis, TN, and New Orleans, LA, on the
West to Miami, FL,
Jacksonville, FL, Charleston, SC, Norfolk, VA, Washington, DC, and
Philadelphia, PA, on the
East. Other major metropolitan areas served by CSX include Atlanta, GA,
Nashville, TN,
Cincinnati, OH, Detroit, MI, Pittsburgh, PA, Baltimore, MD, Charlotte, NC,
Birmingham, AL,
and Louisville, KY. CSX interchanges traffic with other railroads at virtually
all of the
aforementioned locations and at numerous other points on its railroad system.

NS operates approximately 14,282 route miles and 25,236 track miles of
railroad in 20
states, primarily in the South and the Midwest, and in Ontario, Canada. Of
that total,
approximately 1,520 miles are operated under trackage rights while the
remaining mileage is
either owned by NS or operated by NS under contract or lease. NS has routes
to, and serves,
virtually every major market in an area that stretches from Kansas City, MO, in
the Midwest to
Norfolk, VA, in the East, to Chicago, IL, and Buffalo, NY, in the North, and to
New Orleans,
LA, and Jacksonville, FL, in the South. These markets include Memphis,
Chattanooga and
Knoxville, TN; St. Louis, MO; Fort Wayne, IN; Detroit, MI; Toledo,
Cincinnati, Columbus, and
Cleveland, OH; Louisville and Lexington, KY; Bluefield, WV; Alexandria, Roanoke,
Lynchburg, and Richmond, VA; Winston-Salem, Raleigh, Durham, Charlotte, and
Morehead
City, NC; Greenville, Spartanburg, Columbia, and Charleston, SC; Atlanta,
Macon, Valdosta,
and Savannah, GA; Bessemer, Birmingham, Montgomery, and Mobile, AL; Des Moines,
IA; and
Peoria, Springfield, and Decatur, IL. NS interchanges traffic with other
railroads at virtually all
of these locations and at numerous other locations on its railroad system.

Conrail operates approximately 10,500 miles of railroad in the Northeast
and Midwest,
and its primary network forms an "X" connecting Chicago (via the Chicago Line)
and East St.
Louis (via the St. Louis and Indianapolis Lines) in the West, with Boston, MA,
New York, NY,
and Northern New Jersey (via the Chicago Line and other main lines), and with
Pittsburgh,
Harrisburg, PA, Philadelphia, Baltimore, and Washington, DC (via the Pittsburgh
Line and other
main lines) in the East. The "hub" of the "X" is located in, and about,
Cleveland, OH. Conrail's
principal interchange points are in: Chicago, East St. Louis, and Streator,
IL; Salem, IL, via
Union Pacific Railroad Company (UPRR) trackage rights between Salem and St.
Elmo, IL, on
the St. Louis Line; Cincinnati; Hagerstown, MD; and Washington, DC. Other
important
interchange points include Effingham, IL; Fort Wayne, IN; Toledo and
Columbus, OH; Buffalo
and Niagara Falls, NY; Montreal, Quebec; Rotterdam Junction, NY; and
Worcester (including
Barbers), MA.(38)

THE CSX/NS/CR TRANSACTION. The transaction for which
approval is sought in
the primary application involves the joint acquisition of control by CSX and NS
of CRR and its
subsidiaries (the Control Transaction) and the division between CSX and NS of
the operation
and use of Conrail's assets (the Division). The Control Transaction and the
Division are
governed principally by an agreement (the Transaction Agreement) dated as of
June 10, 1997,
between CSXC, CSXT, NSC, NSR, CRR, CRC, and CRR Holdings LLC (CRR Holdings, a
recently created limited liability company jointly owned by CSXC and NSC).
See CSX/NS-25,
Volumes 8B & 8C (the Transaction Agreement, including various schedules and
exhibits). The
Control Transaction and the Division are also governed by a letter agreement
(the CSX/NS Letter
Agreement) dated as of April 8, 1997, between CSXC and NSC, but only to the
extent such
CSX/NS Letter Agreement has not been superseded either by the Transaction
Agreement or by
the agreement (the CRR Holdings Agreement) that governs CRR Holdings.
See CSX/NS-25,
Volume 8A at 350-99 (the CSX/NS Letter Agreement) and at 400-36 (the CRR
Holdings
Agreement).

Control Of Conrail. CSX and NS have already acquired 100%
of the common stock of
CRR in a series of transactions that included a CSX tender offer that was
consummated on
November 20, 1996, an NS tender offer that was consummated on
February 4, 1997, a joint
CSX/NS tender offer that was consummated on May 23, 1997, and a merger that was
consummated on June 2, 1997. Following this series of transactions: CRC
remains a direct
wholly owned subsidiary of CRR; CRR has become a direct wholly owned subsidiary
of Green
Acquisition Corp. (Tender Sub); Tender Sub is now a direct wholly owned
subsidiary of CRR
Holdings; and CRR Holdings is jointly owned by CSXC and NSC (CSXC holds a
50% voting
interest and a 42% equity interest in CRR Holdings; NSC holds a 50% voting
interest and a 58%
equity interest in CRR Holdings). The merger that was consummated on
June 2, 1997 (the
Merger) involved the merger of Green Merger Corp. (Merger Sub, a direct wholly
owned
subsidiary of Tender Sub) into CRR, with CRR being the surviving corporation;
and, in
connection with the Merger: (i) each remaining outstanding share of CRR common
stock not
held by CSX, NS, or their affiliates was converted into the right to receive
$115 in cash, without
interest; and (ii) the shares of Merger Sub, all of which were then owned
by Tender Sub, were
converted into 100 newly issued shares of CRR, all of which were placed into a
voting trust (the
CSX/NS Voting Trust) to prevent CSXC and NSC, and their respective affiliates,
from
exercising premature control of CRR and its carrier subsidiaries pending review
by the Board of
the primary application. See CSX/NS-25, Volume 8A at 323-49 (the
agreement that governs the
CSX/NS Voting Trust). At the present time, in accordance with the agreement
that governs the
CSX/NS Voting Trust, the affairs of CRR and CRC remain under the control of
their
independent boards of directors.

The Transaction Agreement provides that, following the effective date of
the Board's
approval of the primary application (the Control Date),(39) CRR and CRC will each be managed by
a board of directors consisting of six directors divided into two classes, each
class having three
directors. On each board, CSXC will have the right to designate three
directors and NSC will
likewise have the right to designate three directors; and actions that require
the approval of either
board will require approval both by a majority of the directors on that board
designated by CSX
and by a majority of the directors on that board designated by NS.

Division Of Conrail. The Transaction Agreement provides
that, if the primary
application is approved, the division of the operation and use of Conrail's
assets will be effected
on the Closing Date, which is defined as the third business day following the
date on which
certain conditions precedent (including the effectiveness of a final Board
order and, where
necessary, sufficient labor implementing agreements) shall have been satisfied
or waived, or such
other date as may be agreed upon. See CSX/NS-18 at 11; CSX/NS-25,
Volume 8B at 45. It is
anticipated that, during the period beginning on the Control Date and ending on
the Closing
Date, CSX and NS will exercise joint control of Conrail as a separately
functioning rail system.(40)

Formation Of NYC And PRR. To effect the Division, CRC
will form two wholly
owned subsidiaries (referred to collectively as the Subsidiaries):
New York Central Lines LLC
(NYC) and Pennsylvania Lines LLC (PRR). CSXC will have exclusive authority to
appoint the
officers and directors of NYC; NSC will likewise have exclusive authority to
appoint the officers
and directors of PRR; and CRC, as the sole member of the Subsidiaries, will
(with certain
exceptions) follow CSXC's and NSC's directions with respect to the management
and operation
of NYC and PRR, respectively.

Allocation Of Conrail Assets And Liabilities. On the date
of the Division, CRC will
assign to NYC and PRR certain of CRC's assets. NYC will be assigned those CRC
assets
designated to be operated as part of the CSX rail system (the NYC-Allocated
Assets), and PRR
will be assigned those CRC assets designated to be operated as part of the NS
rail system (the
PRR-Allocated Assets). These assets will include, among other things, certain
lines and facilities
currently operated by Conrail, whether owned by Conrail or operated by Conrail
under trackage
rights. Certain additional assets (referred to as the Retained Assets) will
continue to be held by
CRR and CRC (or their subsidiaries other than NYC and PRR) and will be operated
by them for
the benefit of CSX and NS. In addition, on the date of the Division: the
former Conrail line now
owned by NS that runs from Fort Wayne, IN, to Chicago, IL (the Fort Wayne
Line), will be
transferred to Conrail in a like-kind exchange for Conrail's
Chicago South/Illinois Lines (the
Streator Line); and Conrail will assign the Fort Wayne line to NYC, to be
operated together with
the other Conrail lines to be assigned to NYC and used by CSX as part of the
CSX rail system.

Assets Allocated To NYC. The NYC-Allocated Assets will include
the following primary
routes currently operated by Conrail (routes over which Conrail operates
pursuant to trackage
rights are designated "TR"):

(5) Bowie to Woodzell, MD, including (a) Bowie to Morgantown, and
(b) Brandywine to
Chalk Point;

(6) NY/NJ to Philadelphia (West Trenton Line), including Philadelphia to
North NJ
Terminal;

(7) Washington, DC, to Landover, MD;

(8) Quakertown Branch, line segment from Philadelphia Terminal to
Quakertown, PA
(TR); and

(9) Chicago Area, line segment from Porter, IN, to the westernmost point of
Conrail
ownership in Indiana.

Along with these lines, CSXT will operate certain yards and shops, as well
as the Conrail
Philadelphia Headquarters and Philadelphia area information technology
facilities.

Assets Allocated To PRR. The PRR-Allocated Assets will include
the following primary
routes currently operated by Conrail (routes over which Conrail operates
pursuant to trackage
rights are designated "TR"):

Along with these lines, the abandoned Conrail line from Danville to
Schneider, IL, will
also be a PRR-Allocated Asset.

Allocated Assets: Other Aspects. Certain equipment will be
included in the
NYC-Allocated Assets and the PRR-Allocated Assets and will be made available to
CSXT and
NSR pursuant to a CSXT Equipment Agreement and an NSR Equipment Agreement,
respectively. Much of the locomotive equipment and rolling stock equipment,
however, will not
be included in the NYC- and PRR-Allocated Assets but will be included, instead,
in the Retained
Assets (discussed below), and will be leased by CRC or its affiliates to NYC or
PRR pursuant to
equipment agreements to be negotiated by the parties.

CRC currently holds certain trackage rights over CSXT and NSR. In general
(though
there are exceptions), CRC will assign the trackage rights that it holds over
CSXT to PRR (to be
operated by NSR), and it will assign the trackage rights that it holds over NSR
to NYC (to be
operated by CSXT).

The shares currently owned by Conrail in TTX Company (TTX, formerly known as
Trailer Train) will be allocated to NYC and PRR. Applicants' current ownership
interests in
TTX are: CSX, 9.345%; NS, 7.788%; Conrail, 21.807%. Following
approval of the primary
application, the ownership of TTX by applicants and their subsidiaries will be
as follows: CSX,
9.345%; NYC, 10.125%; NS, 7.788%; PRR, 11.682%.

Conrail's 50% interest in Triple Crown Services Company will be allocated
to PRR.

Certain additional special treatments are provided in particular areas
within the allocated
assets. A description of the areas in which special arrangements are made is
set forth below
under the heading "Other Areas with Special Treatments."(42)

Applicants indicate that they have taken steps to ensure that all of the
existing contractual
commitments of Conrail to its shippers will be fulfilled. The Transaction
Agreement provides
that all transportation contracts of CRC in effect as of the Closing Date
(referred to as Existing
Transportation Contracts) will remain in effect through their respective stated
terms and will be
allocated as NYC-Allocated Assets and PRR-Allocated Assets, and that the
obligations under
them shall be carried out after the Closing Date by CSXT, utilizing
NYC-Allocated Assets, and
by NSR, using PRR-Allocated Assets, or pursuant to the Shared Assets Areas
Agreements, as the
case may be. The Transaction Agreement further provides, with respect to the
Existing
Transportation Contracts, that CSX and NS: will allocate the responsibilities
to serve customers
under these contracts; and will cooperate as necessary to assure shippers under
these contracts all
benefits, such as volume pricing, volume refunds, and the like, to which they
are contractually
entitled.

Retained Assets. The Retained Assets include assets contained
within three
Shared Assets Areas (SAAs) that are more fully described below: the North
Jersey SAA; the
South Jersey/Philadelphia SAA; and the Detroit SAA.

The Retained Assets also include Conrail's System Support Operations (SSO)
facilities,
including equipment and other assets associated with such facilities, currently
used by Conrail to
provide support functions benefitting its system as a whole, including
Conrail's: (1) customer
service center in Pittsburgh, PA; (2) crew management facility in
Dearborn, MI; (3) system
maintenance-of-way equipment center in Canton, OH; (4) signal repair
center in Columbus, OH;
(5) system freight claims facility in Buffalo, NY; (6) system
non-revenue billing facility at
Bethlehem, PA; (7) system rail welding plant at Lucknow (Harrisburg), PA;
(8) system road
foreman/engineer training center at Philadelphia and Conway, PA;
(9) police operations center at
Mt. Laurel, NJ; (10) the Philadelphia Division headquarters building and
offices located at
Mount Laurel, NJ; and (11) other SSO facilities identified by CSX and NS
prior to the Closing
Date. Each SSO Facility will be operated by Conrail for the benefit of
CSXT/NYC and
NSR/PRR, and the costs of operating each SSO Facility will be retained by
Conrail as
"Corporate Level Liabilities" and will be shared between CSX and NS.(43)

Liabilities. In general: NYC will assume all liabilities arising
on or after the Closing
Date that relate predominantly to the NYC-Allocated Assets; PRR will assume all
such liabilities
that relate predominantly to the PRR-Allocated Assets; CRC will be responsible
for all such
liabilities that do not relate predominantly to the NYC- or PRR-Allocated
Assets; and CRC will
also be responsible for certain liabilities arising prior to the Closing Date.

Separation Costs (as defined in the Transaction Agreement, see
CSX/NS-25, Volume 8B
at 20) incurred following the Control Date in connection with Conrail agreement
employees now
working jobs at or in respect of NYC-Allocated Assets will be the sole
responsibility of CSX,
while Separation Costs incurred in connection with Conrail agreement employees
now working
jobs at or in respect of PRR-Allocated Assets will be the sole responsibility
of NS. Separation
Costs incurred in connection with Conrail agreement employees working jobs at
or in respect of
Retained Assets will be shared by CSX and NS. Separation Costs incurred
following the Control
Date for Conrail agreement employees at Conrail's Altoona and Hollidaysburg
shops will be the
responsibility of NS, and Separation Costs incurred following the Control Date
in connection
with agreement employees at Conrail's Philadelphia headquarters and technology
center and
Conrail's Pittsburgh customer service center will be the responsibility of
CSX. Separation Costs
for eligible Conrail non-agreement employees will be shared by CSX and NS.

After the Closing Date, compensation and other expenses (excluding
Separation Costs)
for agreement employees (other than certain Conrail employees performing
general and
administrative functions) working jobs at or in respect of NYC-Allocated Assets
will be the sole
responsibility of CSX, while such expenses for such agreement employees working
jobs at or in
respect of PRR-Allocated Assets will be the sole responsibility of NS.

Operation Of Assets. Applicants indicate: that CSXT and
NYC will enter into the
CSXT Operating Agreement, which will provide for CSXT's use and operation of the
NYC-Allocated Assets; that NSR and PRR will enter into the NSR Operating
Agreement, which
will provide for NSR's use and operation of the PRR-Allocated Assets; and that
CRC, NYC,
PRR, CSXT and/or NSR will enter into certain Shared Assets Areas Operating
Agreements,
which will provide for the operation of certain Shared Assets Areas for the
benefit of both CSXT
and NSR.

Allocated Assets Operating Agreements. The CSXT Operating
Agreement and the NSR
Operating Agreement (collectively, the Allocated Assets Operating Agreements)
will provide
that CSXT and NSR will each have the right, for an initial term of
25 years, to use and operate,
as part of their respective systems, the NYC-Allocated Assets and the
PRR-Allocated Assets,
respectively. These agreements will require CSXT and NSR each to bear the
responsibility for
and the cost of operating and maintaining their respective Allocated Assets.
CSXT and NSR will
each receive for its own benefit and in its own name all revenues and profits
arising from or
associated with the operation of its Allocated Assets.

CSXT will pay NYC an operating fee based on the fair market rental value of
the NYC-Allocated Assets. NSR will similarly pay PRR an operating fee based on
the fair market rental
value of the PRR-Allocated Assets. CSXT and NSR will have the right to receive
the benefits of
NYC and PRR, respectively, under any contract or agreement included in the
NYC-Allocated
Assets or the PRR-Allocated Assets, respectively, and, with the consent of NYC
and PRR,
respectively, to modify or amend any such contract or agreement on behalf of
NYC and PRR.

CSXT and NSR will each have the right to renew its Allocated Assets
Operating
Agreement for two additional terms of 10 years each. The Allocated Assets
Operating
Agreements contemplate that, upon termination of the agreements, CSXT and NSR
will be
deemed to have returned their Allocated Assets to NYC or PRR, subject to any
regulatory
requirements.

Shared Assets Areas And Operating Agreements. Both CSXT and NSR
will be permitted
to serve shipper facilities located within the three SAAs (the North Jersey
SAA, the
South Jersey/Philadelphia SAA, and the Detroit SAA), which will be owned,
operated, and
maintained by Conrail for the exclusive benefit of CSX and NS. CSXT and NSR
will enter into
an SAA Operating Agreement with CRC in connection with each of the SAAs, and
CRC will
grant to CSXT and NSR the right to operate their respective trains, with their
own crews and
equipment and at their own expense, over any tracks included in the SAAs. CSXT
and NSR will
each have exclusive and independent authority to establish all rates, charges,
service terms,
routes, and divisions, and to collect all freight revenues, relating to freight
traffic transported for
its account within the SAAs. Other carriers that previously had access to
points within the SAAs
will continue to have the same access as before.

(1) The North Jersey SAA encompasses all Conrail Northern New Jersey
trackage east of
and including the NEC, and also (a) certain line segments north of the NEC as
it turns east to
enter the tunnel under the Hudson River, (b) the Conrail Lehigh line west
to Port Reading
Junction, (c) the rights of Conrail on the New Jersey Transit Raritan
line, (d) the Conrail Port
Reading Secondary line west to Bound Brook, (e) the Conrail Perth Amboy
Secondary line west
to South Plainfield, and (f) the NEC local service south to the Trenton area.

(2) The South Jersey/Philadelphia SAA encompasses all Conrail
"Philadelphia" stations
and stations within the Philadelphia City limits, industries located on the
Conrail Chester
Industrial and Chester Secondary tracks, all Conrail trackage in Southern New
Jersey, Conrail's
rights on the NEC north from Zoo Tower in Philadelphia to Trenton, NJ, and the
Ameriport
intermodal terminal and any replacement of such terminal built substantially
through public
funding.

(3) The Detroit SAA encompasses all Conrail trackage and access rights east
of the
CP-Townline (Michigan Line MP 7.4) and south to and including Trenton
(Detroit Line
MP 20).(44)

Other Areas With Special Treatments. A number of other areas,
though not referred to as
SAAs, are nevertheless subject to special arrangements that provide for a
sharing of routes or
facilities to a certain extent.

(1) Monongahela Area: Although the Conrail lines formerly a part of the
Monongahela
Railway will be operated by NS, CSX will have equal access for 25 years,
subject to renewal, to
all current and future facilities located on or accessed from the former
Monongahela Railway,
including the Waynesburg Southern.

(2) Chicago Area: Both CSX and NS will have access to Conrail's rights
concerning
access to and use of the Willow Springs Yard of The Burlington Northern
and Santa Fe Railway
Company (BNSF); applicants will enter into an agreement concerning their
respective rights as
successors to Conrail and as parties controlling the controlling shareholder in
the Indiana Harbor
Belt Railway (IHB), a 51%-owned Conrail subsidiary (the stock of IHB will be a
Conrail-retained asset); certain trackage rights of Conrail over IHB will be
assigned or made
available to NYC to be operated by CSX or to PRR to be operated by NS; CSX and
NS will
enter into an agreement to permit each of them to maintain current access and
trackage rights
enjoyed by them over terminal railroads in the Chicago area; and CSX will be
granted an option,
exercisable if CSX and BNSF come under common control, to purchase the Streator
Line from
Osborne, IN, to Streator, IL.

(3) Ashtabula Harbor Area: NS will have the right to operate and control
Conrail's
Ashtabula Harbor facilities, with CSX receiving use and access, up to a
proportion of the total
ground storage, throughput, and tonnage capacity of 42%.

(4) Buffalo Area: CSX will operate Seneca Yard, and NS will receive access
to yard
tracks in that yard.

(5) Cleveland Area: Conrail's switching yard at Collinwood will be
operated by CSX and
its Rockport Yard will be operated by NS.

(6) Columbus, OH: NS will operate Conrail's Buckeye Hump Yard, and CSX will
operate the former Local Yard and intermodal terminal at Buckeye.

(7) Erie, PA: Norfolk and Western Railway Company (NW, a wholly owned NS
subsidiary) will have a permanent easement and the right to build a track on
the easement along
the Conrail right of way through Erie, PA, to be operated by CSX. NW will have
trackage rights
in Erie to connect its existing Buffalo-Cleveland line if such connection can
be achieved without
using the Conrail Buffalo-Cleveland line to be operated by CSX.

(8) Fort Wayne, IN: CSX will operate the line between Fort Wayne and
Chicago,
currently owned by NS.

(9) Indianapolis, IN: NS will have overhead trackage rights from Lafayette
and Muncie
to Hawthorne Yard to serve, via CSX switch, shippers that presently receive
service from two
railroads.

(10) Toledo, OH: Conrail's Stanley Yard will be operated by CSX, and its
Airline
Junction Yard will be operated by NS.

(11) Washington, DC: Conrail's Landover Line from Washington, DC, to
Landover, MD,
will be allocated to CSX, and NS will be given overhead trackage rights.

(12) Allocation of Rights with Respect to Freight Operations Over Amtrak's
NEC:
Conrail's NEC overhead trackage rights north of New York (Penn Station) will be
assigned to
CSX. Both CSX and NS will have overhead rights to operate trains between
Washington, DC,
and New York (Penn Station), subject to certain limitations. From Zoo Tower,
Philadelphia, to
Penn Station, NY, Conrail's NEC rights to serve local customers will be part of
the Retained
Assets and Conrail will assign those rights to CSX and NS, with CSX and NS
having equal
access to all local customers and facilities. Between Washington, DC, and Zoo
Tower,
Philadelphia, Conrail's NEC rights to serve local customers will be assigned to
NS. The right to
serve local customers on the NEC north of New York (Penn Station) will be
assigned to CSX.(45)

Succession To Conrail Activities. Applicants intend that
the Allocated Assets conveyed
to CSX (NYC) and NS (PRR) will be operated by CSXT and NSR, respectively, and
that both
the Allocated Assets conveyed to CSX and NS as well as the Retained Assets made
available by
Conrail to CSX or NS or both will be enjoyed and used by CSX and NS (subject to
the terms of
the governing agreements) as if the carrier in question were itself Conrail.
Applicants similarly
intend that the SAAs will be used, enjoyed, and operated as fully by CSX and NS
as if each of
them were Conrail.

THE CONTINUING CONRAIL ACTIVITIES. From the Closing Date
forward, CSX
and NS will be responsible for all of the operating expenses and new
liabilities attributable to the
assets which they are operating. It is expected, however, that most of the
pre-Closing Date
liabilities of CRC, CRR, and their subsidiaries will remain in place. It is
contemplated that CRC
will pay its pre-Closing Date liabilities, including its debt obligations, out
of payments received,
either directly or through NYC and PRR, from CSXT and NSR in connection with
the Allocated
Assets and the SAAs. Applicants expect that such payments will be sufficient
to permit CRC
and its subsidiaries (1) to cover their operating, maintenance, and other
expenses, (2) to pay all of
their obligations as they mature, (3) to provide dividends to CRR sufficient to
permit it to
discharge its debts and obligations as they mature, and (4) to receive a
fair return for the
operation, use, and enjoyment by CSX and NS of the Allocated Assets and SAAs.
Applicants
add, however, that, if for any reason these sources of funds to CRC and CRR
prove insufficient
to permit them to pay and discharge their obligations, CSX and NS have agreed
that CRR
Holdings shall provide the necessary funds, which it will obtain from CSXC and
NSC.

Applicants anticipate that, following the Division of Conrail, approximately
350 employees will be employed by Conrail in the Philadelphia area (where
the headquarters of
CRR and CRC are now located). These employees will include Conrail employees
managing
and operating trains for CSX and NS, the employees in the local SAA, and the
management
personnel for the continuing Conrail functions. In addition, CSX and NS each
anticipates
establishing a regional headquarters-type function in Philadelphia at which an
undetermined
number of additional personnel will be employed.

It is intended that, following the Division: CRC will not hold itself out
to the public as
performing transportation services directly and for its own account; CRC will
not enter into any
contract (other than with CSXT or NSR) for the performance of transportation
services; and all
transportation services performed by CRC will be performed as agent or
subcontractor of CSXT
or NSR.

"2-to-1" Situations. Applicants claim: that the division
of Conrail proposed in the
primary application has enabled applicants to avoid, "wherever possible,"
situations where
shippers will see their rail options decline from two carriers to one; and that
in "virtually all of
the few" 2-to-1 situations that the division proposed in the primary
application would otherwise
have entailed, CSX and NS have agreed to provide one another with trackage
and/or haulage
rights that will permit the continuation of two rail carrier service.
See CSX/NS-18 at 4. Seealso
CSX/NS-18 at 74-75 (CSX will provide trackage or haulage rights that will allow
for alternative
rail service to facilities that otherwise would be, as a result of the
transaction proposed in the
primary application, rail-served solely by CSX) and 80 (NS will provide
trackage or haulage
rights that will allow for alternative rail service to facilities that
otherwise would be, as a result of
the transaction proposed in the primary application, rail-served solely by NS).

Public Interest Justifications. Applicants claim that the
CSX/NS/CR transaction: will
create vigorous rail competition in large portions of the Mid-Atlantic and
Northeastern regions
now served only by Conrail; will create numerous new single-line routes between
the Northeast
and the Southeast and between the Northeast and the Midwest, which will result
in improved
transit times, greater reliability of on-time delivery, increased safety, and
other service and
efficiency gains; will allow CSX and NS to divert substantial freight traffic
from the congested
highways of the Eastern United States; and will generate, each year, nearly
$1 billion in
quantified public benefits(46) and also
significant additional benefits (most notably those benefits
resulting from the introduction of rail competition into areas now rail-served
only by Conrail).

Labor Impact. Applicants have provided three Labor Impact
Exhibits, each using a
different base line in calculating the impacts that the transactions proposed
in the primary
application and the related filings will have on rail carrier employees.
See CSX/NS-26 (filed
July 7, 1997), which: (a) corrects the single Labor Impact Exhibit filed with
the primary
application itself on June 23, 1997, see CSX/NS-18 at 24-25; CSX/NS-20,
Volume 3A at 485-546; CSX/NS-20, Volume 3B at 493-526; and (b) adds two
additional Labor Impact Exhibits.
Seealso Decision No. 7, served May 30, 1997, slip op. at
8-9 (we required applicants to use the
year 1995 as the base line for setting forth the impacts the proposed
transactions will have on rail
carrier employees, but we added that applicants, if they were so inclined,
would be allowed to
supplement 1995 data with data demonstrating employment reductions in 1996
and/or 1997).

Applicants' 1996/97 Labor Impact Exhibit projects, with respect to both the
CSX and NS
expanded systems, that the proposed transactions will result in the abolition
of 3,090 jobs and the
creation of 1,109 jobs (for a net loss of 1,981 jobs), and will also result in
the transfer of an
additional 2,323 jobs. See CSX/NS-26, 1996/97 Exhibit at 13. The
1996/97 Exhibit is based on
an April 1, 1997 non-agreement employee count and a November 1996 agreement
employee
count.

Applicants' 1996 Labor Impact Exhibit projects, with respect to both the
CSX and NS
expanded systems, that the proposed transactions will result in the abolition
of 3,822 jobs and the
creation of 1,152 jobs (for a net loss of 2,670 jobs), and will also result in
the transfer of an
additional 2,323 jobs. See CSX/NS-26, 1996 Exhibit at 16. The 1996
Exhibit is based on
calendar year 1996 average monthly employment levels.(47)

Applicants' 1995 Labor Impact Exhibit projects, with respect to both the
CSX and NS
expanded systems, that the proposed transactions will result in the abolition
of 6,654 jobs and the
creation of 1,699 jobs (for a net loss of 4,955 jobs), and will also result in
the transfer of an
additional 2,288 jobs. See CSX/NS-26, 1995 Exhibit at 33. The 1995
Exhibit is based on
calendar year 1995 average monthly employment levels. Butsee
CSX/NS-26, V.S.
Peifer/Spenski at 1 n.1 (1995 data is incomplete).

Applicants emphasize that the projections contained in their Labor Impact
Exhibits are
short term projections; applicants maintain that, in the long run, the
transactions proposed in the
primary application and the related filings will provide opportunities for rail
transportation
growth and, therefore, new jobs. Applicants anticipate that, if we approve the
transactions
proposed in the primary application and the related filings, we will impose on
such transactions
the standard labor protective conditions customarily imposed on similar such
transactions. See
CSX/NS-18 at 25.

RELIEF REQUESTED IN THE LEAD DOCKET. In the STB Finance
Docket No.
33388 lead docket, applicants seek: approval of the transaction proposed in
the primary
application (in paragraph 1 below); approval of certain "elements" of that
transaction, referred to
as Transaction Elements (in paragraphs 2, 3, 4, 5, 6, 7, 8, 9, 10, and 11
below); and a "fairness
determination" respecting the terms under which CSX and NS have acquired all of
the common
stock of CRR (in paragraph 12 below).

(1) Applicants seek approval and authorization, pursuant to 49 U.S.C. 11323
and 11324,
of the acquisition by CSXC and NSC (each a noncarrier corporation controlling
one or more rail
carriers) of joint control of, and the power to exercise joint control over,
CRR (also a noncarrier
corporation controlling one or more rail carriers). See 49 U.S.C.
11323(a)(5).(48)

(2) Applicants seek approval and authorization, pursuant to 49 U.S.C. 11323
and 11324,
of the acquisition by NYC and PRR of, and of the operation by CSXT and NSR
over, the Conrail
lines and other assets, including without limitation trackage and other rights,
that will be
allocated to CSX (NYC) and NS (PRR), respectively. Applicants also ask that we
expressly
provide that, pursuant to the sought approval and authorization under
49 U.S.C. 11323 and
11324, and notwithstanding any purported limitations on assignability, NYC and
PRR each will
have the same right, title, and interest in the Conrail lines and other assets
forming its part of the
Allocated Assets as Conrail itself now has, including the power to pass the use
and enjoyment of
those lines and other assets to CSXT and NSR.(49)

(3) Applicants request a declaratory order that 49 U.S.C. 10901 does
not apply to the
transfer of the Allocated Assets to NYC and PRR.(50) Applicants concede that, because NYC and
PRR are not now carriers, an argument can be made that authority under
49 U.S.C. 10901 is
required for the transfer; applicants maintain, however, that the transfer
should be viewed in
context as simply a part of a larger transaction involving the operation by CSX
and NS of the
assets to be transferred to NYC and PRR, respectively; and applicants claim
that the transfer,
when viewed in context, requires authorization not under 49 U.S.C. 10901 but
rather under 49
U.S.C. 11323 and 11324. In the event we do not issue the sought declaratory
order, applicants
seek authorization for the transfer of the CRC assets to NYC and PRR: under
49 U.S.C. 10901;
and, in order to bring the transfer within the scope of the immunizing power of
49 U.S.C.
11321(a), also under 49 U.S.C. 11323 and 11324.

(4) Applicants seek approval and authorization, pursuant to 49 U.S.C. 11323
and 11324:
(i) for CSXT and NSR to enter into the Allocated Assets Operating Agreements
and to operate
the assets held by NYC and PRR, respectively; (ii) for CSXT, NSR, and CRC
to enter into the
three SAA Operating Agreements and to operate the assets in the SAAs; and (iii)
for CSX and
NS to use, operate, perform, and enjoy the Allocated Assets and the assets in
the SAAs
consisting of assets other than routes (including, without limitation, the
Existing Transportation
Contracts). See 49 U.S.C. 11323(a)(2). Seealso 49
U.S.C. 11323(a)(6). Applicants also request
a declaratory order, or a declaration to the same effect as a declaratory
order: (a) that, by virtue
of the immunizing power of 49 U.S.C. 11321(a), CSX and NS will have the
authority to conduct
operations over the routes of Conrail covered by the Trackage Agreements as
fully and to the
same extent as Conrail itself could, whether or not such routes are listed in
CSX/NS-18,
Appendix L (CSX/NS-18 at 216-24), and notwithstanding any clause in any such
agreement
purporting to limit or prohibit unilateral assignment by Conrail of its rights
thereunder; and (b)
that, also by virtue of the immunizing power of 49 U.S.C. 11321(a), CSX
and NS may use,
operate, perform, and enjoy the Allocated Assets and the assets in the SAAs
consisting of assets
other than routes (including, without limitation, the Existing Transportation
Contracts) as fully
and to the same extent as Conrail itself could.

(5) For the period following the transfer of CRC assets to NYC and PRR,
applicants seek
approval and authorization, pursuant to 49 U.S.C. 11323 and 11324:
(a) for CSXC, NSC, and
CRR to continue to control NYC and PRR; and (b) for the common control, by
CSXC, CSXT,
NSC, NSR, CRR, and CRC of (i) NYC and PRR, and (ii) the carriers currently
controlled by
CSXC, CSXT, NSC, NSR, CRR, and CRC. Such authorization and approval will be
necessary
because, as applicants note: CRC, NYC, and PRR will not be part of a "single
system" of rail
carriers, and therefore authorization to control CRC will not in and of itself
imply authorization
to control NYC and PRR; and, although CSX will exercise day-to-day control of
NYC and NS
will exercise day-to-day control of PRR, the fact that certain major actions
concerning NYC and
PRR will remain under the control of CRC will result in an ongoing common
control relationship
involving CSXC, NSC, and CRR, and the subsidiaries of each.

(6) Applicants seek approval and authorization, pursuant to 49 U.S.C. 11323
and 11324:
for the acquisition by CSXT of certain trackage rights over PRR; and for the
acquisition by NSR
of certain trackage rights over NYC. See 49 U.S.C. 11323(a)(6). The
lines over which these
trackage rights will run are listed in items 1.B and 1.A, respectively, of
Schedule 4 to the
Transaction Agreement. See CSX/NS-25, Volume 8B at 110-21.(51)

(7) Applicants seek approval and authorization, pursuant to 49 U.S.C. 11323
and 11324,
of the trackage rights provided to CSXT, see CSX/NS-25, Volume 8C at
715-57, to access all
current and future facilities located on or accessed from the former
Monongahela Railway,
including the Waynesburg Southern. See 49 U.S.C. 11323(a)(6).

(8) The trackage rights covered by paragraph 6 include, among many other
such trackage
rights, certain trackage rights to be acquired by NS over the NYC
Bound Brook, NJ-Woodbourne, PA line. See CSX/NS-25, Volume 8B at
112 (item 20). These particular trackage
rights, however, are intended to be temporary in duration, and will expire, by
their terms, at the
end of 3 years. Applicants therefore seek authorization, pursuant to
49 U.S.C. 10903, for NS to
discontinue the Bound Brook-Woodbourne trackage rights in accordance with the
terms thereof.

(9) Applicants seek approval and authorization, pursuant to 49 U.S.C. 11323
and 11324,
of certain incidental trackage rights granted in connection with operations
within the SAAs.
These trackage rights include: (i) trackage rights granted by CSXT to NSR
and CRC; and
(ii) trackage rights granted by NSR to CSXT and CRC.
See CSX/NS-18 at 97-98. Seealso
CSX/NS-25, Volume 8C at 76, 115-16, and 156.

(10) To the extent that any matter concerning either (i) the joint
ownership by CSX and
NS of CRR, CRC, NYC, and/or PRR, or (ii) the Transaction Agreement and the
Ancillary
Agreements referred to therein,(52) including
the provision for handling Existing Transportation
Contracts, might be deemed to be a pooling or division by CSX and NS of traffic
or services or
of any part of their earnings, applicants request approval for such pooling or
division under
49 U.S.C. 11322.(53)

(11) Applicants seek approval and authorization, pursuant to 49 U.S.C.
11323 and 11324,
for the transfer of Conrail's Streator Line from Conrail to NSR/NW.(54)

(12) Applicants seek a determination that the terms under which CSX and NS,
both
individually and jointly, have acquired all of the common stock of CRR are fair
and reasonable
to the stockholders of CSXC, the stockholders of NSC, and the stockholders of
CRR. SeeSchwabacher v. United States, 334 U.S. 192 (1948).

RELATED FILINGS. In STB Finance Docket No. 33388
(Sub-No. 1), CSXT has filed
a notice of exemption under 49 CFR 1150.36 to operate, at Crestline, OH, a
connection track in
the northwest quadrant of the intersection of CRC's North-South line between
Greenwich, OH,
and Indianapolis, IN, and CRC's East-West line between Pittsburgh, PA, and Fort
Wayne, IN.
The connection will extend approximately 1,507 feet between approximately
MP 75.4 on the
North-South line and approximately MP 188.8 on the East-West line.(55)

In STB Finance Docket No. 33388 (Sub-No. 2), CSXT has filed a petition
under 49
U.S.C. 10502 for exemption from the provisions of 49 U.S.C. 10901 to operate,
in Willow
Creek, IN, a connection track in the southeast quadrant of the intersection
between CSXT's line
between Garrett, IN, and Chicago, IL, and CRC's line between Porter, IN, and
Gibson Yard, IN
(outside Chicago). The connection will extend approximately 2,800 feet between
approximately
MP BI-236.5 on the CSXT line and approximately MP 246.8(56) on the CRC line.(57)

In STB Finance Docket No. 33388 (Sub-No. 3), CSXT has filed a petition
under 49
U.S.C. 10502 for exemption from the provisions of 49 U.S.C. 10901 to operate,
in Greenwich,
OH, connection tracks in the northwest and southeast quadrants of the
intersection between the
CSXT line between Chicago and Pittsburgh and the CRC line between Cleveland and
Cincinnati.
The connection in the northwest quadrant, a portion of which will be
constructed utilizing
existing trackage and/or right-of-way of the Wheeling & Lake Erie
Railway Company, will
extend approximately 4,600 feet between approximately MP BG-193.1 on the CSXT
line and
approximately MP 54.1 on the CRC line. The connection in the southeast
quadrant will extend
approximately 1,044 feet between approximately MP BG-192.5 on the CSXT line and
approximately MP 54.6 on the CRC line.(58)

In STB Finance Docket No. 33388 (Sub-No. 4), CSXT has filed a petition
under 49
U.S.C. 10502 for exemption from the provisions of 49 U.S.C. 10901 to operate,
at Sidney
Junction, OH, a connection track in the southeast quadrant of the intersection
between the CSXT
line between Cincinnati, OH, and Toledo, OH, and the CRC line between
Cleveland, OH, and
Indianapolis, IN. The connection will extend approximately 3,263 feet between
approximately
MP BE-96.5 on the CSXT line and approximately MP 163.5 on the CRC
line.(59)

In STB Finance Docket No. 33388 (Sub-No. 5), NW has filed a petition under
49 U.S.C.
10502 for exemption from the provisions of 49 U.S.C. 10901 to operate, at
Sidney, IL, a
connection track between the UPRR north-south line between Chicago, IL, and
St. Louis, MO,
and the NW east-west line between Decatur, IL, and Tilton, IL. The connection,
which will be in
the southwest quadrant of the intersection of the two lines, will be
approximately 3,256 feet in
length.(60)

In STB Finance Docket No. 33388 (Sub-No. 6), NW has filed a petition under
49 U.S.C.
10502 for exemption from the provisions of 49 U.S.C. 10901 to operate, at
Alexandria, IN, a
connection track between the CRC line between Anderson, IN, and Goshen, IN, and
the NW line
between Muncie, IN, and Frankfort, IN. The connection, which will be in the
northeast quadrant
of the intersection of the two lines, will be approximately 970 feet in
length.(61)

In STB Finance Docket No. 33388 (Sub-No. 7), NW has filed a petition under
49 U.S.C.
10502 for exemption from the provisions of 49 U.S.C. 10901 to operate, at
Bucyrus, OH, a
connection track between NW's Bellevue, OH-Columbus, OH line and CRC's Fort
Wayne, IN-Crestline, OH line. The connection, which will be in the southeast
quadrant of the intersection of
the two lines, will be approximately 2,467 feet in length.(62)

In STB Finance Docket No. 33388 (Sub-No. 8), CSXT has filed a notice of
exemption
under 49 CFR 1150.36 to construct and operate, at Little Ferry, NJ, two
connection tracks
between the CRC Selkirk-North Bergen line and the New York, Susquehanna
and Western
Railway (NYS&W) Paterson-Croxton line. The first connection will extend
approximately 480
feet between approximately MP 5.75 on the CRC line and approximately MP 5.65 on
the
NYS&W line. The second connection will extend approximately 600 feet
between
approximately MP 4.04 on the CRC line and approximately MP 4.15 on the
NYS&W line.

In STB Finance Docket No. 33388 (Sub-No. 9), CSXT and The Baltimore and Ohio
Chicago Terminal Railroad Company (B&OCT, a wholly owned CSXT subsidiary)
have filed a
notice of exemption under 49 CFR 1150.36 to construct and operate a connection
track in the
vicinity of 75th Street SW, Chicago, IL, in the southwest quadrant of the
intersection of the lines
of B&OCT and The Belt Railway Company of Chicago (BRC). The connection
will extend
approximately 1,640 feet between approximately MP DC-22.43 on B&OCT's
North-South line
between Cleveland and Brighton Park, and approximately MP 12.95 on BRC's
East-West line
between Bedford Park Yard and South Chicago Yard.

In STB Finance Docket No. 33388 (Sub-No. 10), CSXT has filed a petition
under 49
U.S.C. 10502 for exemption from the provisions of 49 U.S.C. 10901 to construct
and operate a
connection track in Exermont, IL, in the northwest quadrant of the intersection
between CSXT's
Cincinnati-East St. Louis line and CRC's Cleveland-East St. Louis line. The
connection will
extend approximately 3,590 feet between approximately MP BC-327.9 on the CSXT
line and
approximately MP 231.4 on the CRC line.

In STB Finance Docket No. 33388 (Sub-No. 11), CSXT and B&OCT have filed
a notice
of exemption under 49 CFR 1150.36 to construct and operate a connection track
in the vicinity of
Lincoln Avenue in Chicago, IL, in the northeast quadrant of the intersection of
the lines of
B&OCT and IHB. The connection will extend approximately 840 feet
between approximately
MP DC-9.5 on B&OCT's line between Cleveland and Barr Yard, and
approximately MP 10.43
on IHB's line between Gibson Yard and Blue Island Jct.

In STB Finance Docket No. 33388 (Sub-No. 12), NSR has filed a petition
under 49
U.S.C. 10502 for exemption from the provisions of 49 U.S.C. 10901 to construct
and operate, at
Kankakee, IL, a connection track between the Illinois Central Railroad Company
(IC) Chicago,
IL-Gibson City, IL north-south line, over which NSR has trackage rights, and
the CRC Streator,
IL-Schneider, IN east-west line. The connection, which will be in the
southeast quadrant of the
intersection of the two lines, will be approximately 1,082 feet in length.

In STB Finance Docket No. 33388 (Sub-No. 13), NW has filed a notice of
exemption
under 49 CFR 1150.36 to construct and operate a connection track at Tolono, IL,
in the southeast
quadrant of the intersection of the IC line between Chicago, IL, and Centralia,
IL, and the NW
line between Decatur, IL, and Tilton, IL. The connection will be about 1,600
feet in length.

In STB Finance Docket No. 33388 (Sub-No. 14), NW has filed a petition under
49 U.S.C.
10502 for exemption from the provisions of 49 U.S.C. 10901 to construct and
operate, at Butler,
IN, a connection track between NW's Detroit, MI-Fort Wayne, IN line and CRC's
Elkhart, IN-Toledo, OH line. The connection, which will be in the northwest
quadrant of the intersection of
the two lines, will be approximately 1,750 feet in length.

In STB Finance Docket No. 33388 (Sub-No. 15), NW has filed a notice of
exemption
under 49 CFR 1150.36 to construct and operate a connection track at Tolleston,
IN. This track,
which will connect an NW line and a CRC line, will be about 930 feet in
length.

In STB Finance Docket No. 33388 (Sub-No. 16), NW has filed a notice of
exemption
under 49 CFR 1150.36 to construct and operate a double track connection at
Hagerstown, MD.
This track, which will connect an NW line and a CRC line, will be about 800
feet in length.

In STB Finance Docket No. 33388 (Sub-No. 17), NW has filed a notice of
exemption
under 49 CFR 1150.36 to construct and operate a connection track at Ecorse
Junction (Detroit),
MI. This track, which will connect an NW line and a CRC line, will be about
400 feet in length.

In STB Finance Docket No. 33388 (Sub-No. 18), NW has filed a petition under
49 U.S.C.
10502 for exemption from the provisions of 49 U.S.C. 10901 to construct and
operate, at
Blasdell (Buffalo), NY, a connecting track approximately 2,500 feet in length
between NW's
Erie, PA-Buffalo, NY Line and CRC's Buffalo, NY-Harrisburg, PA Line.

In STB Finance Docket No. 33388 (Sub-No. 20), NW has filed a notice of
exemption
under 49 CFR 1150.36 to construct and operate, at Columbus, OH, an NW-CRC
connecting
track approximately 1,423 feet in length. See CSX/NS-22 at 315 (map).

In STB Finance Docket No. 33388 (Sub-No. 21), NW has filed a petition under
49 U.S.C.
10502 for exemption from the provisions of 49 U.S.C. 10901 to construct and
operate, at Oak
Harbor, OH, a connecting track approximately 4,965 feet in length between, and
in the northwest
quadrant of the intersection of, NW's Toledo, OH-Bellevue, OH line and CRC's
Toledo, OH-Cleveland, OH line.

In STB Finance Docket No. 33388 (Sub-No. 22), NW has filed a petition under
49 U.S.C.
10502 for exemption from the provisions of 49 U.S.C. 10901 to construct and
operate, at
Vermilion, OH, a connecting track approximately 5,398 feet in length between
NW's Cleveland,
OH-Bellevue, OH line and CRC's Toledo, OH-Cleveland, OH line.

In STB Finance Docket No. 33388 (Sub-No. 23), NW has filed a notice of
exemption
under 49 CFR 1180.2(d)(5) regarding a joint project involving relocation of
NW's rail line
running down 19th Street in Erie, PA (a distance of approximately
6.1 miles, between
approximately MP B-85.10 near Downing Avenue and approximately MP B-91.25 west
of
Pittsburgh Avenue) to a parallel railroad right-of-way currently owned and
operated by CRC that
will be allocated to CSXT in connection with the primary application.

In STB Finance Docket No. 33388 (Sub-No. 24), CRC and NW have filed a
petition
under 49 U.S.C. 10502 for exemption from the provisions of 49 U.S.C. 11323-25
regarding the
acquisition by CRC (or by NYC) of the Fort Wayne Line, between MP 441.8 at
Fort Wayne, IN,
and MP 319.2 at Tolleston (Gary), IN. See CSX/NS-22 at 446 and 449
(indicating that the
mileposts are as stated in the preceding sentence). Butsee
CSX/NS-22 at 461-62 (indicating that
the mileposts are MP 441.8 at Tolleston and MP 319.2 at Fort Wayne).

In STB Finance Docket No. 33388 (Sub-No. 25), NW and CSXT have filed a
notice of
exemption under 49 CFR 1180.2(d)(7) regarding the acquisition by NW of trackage
rights over
approximately 32.7 miles of a CSXT line between Lima, OH (Erie Junction), at or
near CSXT
MP BE-129.2, and Sidney, OH, at or near CSXT MP BE-96.5. The trackage
rights to be
acquired by NW include overhead trackage rights between Lima and Sidney and
local trackage
rights that will allow NW to serve 2-to-1 shippers at Sidney.

In STB Finance Docket No. 33388 (Sub-No. 26), CSXC, CSXT, and The Lakefront
Dock
and Railroad Terminal Company (LD&RT) have filed an application seeking
approval and
authorization under 49 U.S.C. 11323-25 for the acquisition and exercise by
CSXC and CSXT of
control of LD&RT, and the common control of LD&RT and CSXT and the
other rail carriers
controlled by CSXT and/or CSXC. LD&RT, a Class III railroad in which
CSXT and CRC each
currently owns a 50% voting stock interest, operates approximately 17
miles of yard tracks at
Oregon, OH.

In STB Finance Docket No. 33388 (Sub-No. 27), NW and CSXT have filed a
notice of
exemption under 49 CFR 1180.2(d)(7) regarding the acquisition by NW of overhead
trackage
rights over approximately 5 to 6 miles of a CSXT line between Columbus, OH
(Parsons Yard), at
or near CSXT MP CJ 71.5, and Scioto, OH, at or near CSXT MP CK 2.5.

In STB Finance Docket No. 33388 (Sub-No. 28), CSXT and NW have filed a
notice of
exemption under 49 CFR 1180.2(d)(7) regarding the acquisition by CSXT of
overhead trackage
rights over approximately 2.02 miles of an NW line between Columbus, OH
(Watkins Yard), at
or near NW MP N-696.7, and Bannon, OH, at or near NW MP N-698.72.

In STB Finance Docket No. 33388 (Sub-No. 29), CSXT and NW have filed a
notice of
exemption under 49 CFR 1180.2(d)(7) regarding the acquisition by CSXT of
overhead trackage
rights over approximately 1.4 miles of an NW line between Erie Junction
(Delray), MI, at or near
MP D4.4, and Ecorse Junction, MI, at or near MP D5.8.

In STB Finance Docket No. 33388 (Sub-No. 30), NW and CSXT have filed a
notice of
exemption under 49 CFR 1180.2(d)(7) regarding the acquisition by NW of overhead
trackage
rights over approximately 1.7 miles of a CSXT line between the connection of
two CSXT lines
near Washington Street at or near MP 123.7, and the connection of two CSXT
lines at Pine at or
near MP 122.0, in Indianapolis, IN.

In STB Finance Docket No. 33388 (Sub-No. 31), CSXC and CSXT have filed a
petition
under 49 U.S.C. 10502 for exemption from the provisions of 49 U.S.C. 11323-25,
to the extent
those provisions may apply, regarding the acquisition by CSXC and CSXT of
control of Albany
Port Railroad Corporation (APR). APR, which operates approximately
16.5 miles of track at the
Port of Albany, NY, is owned in equal 50% shares by CRC and D&H (Delaware
and Hudson
Railway Company, Inc., an affiliate of Canadian Pacific Railway Company);(63) and, if the
primary application is approved, CRC's 50% interest in APR will be allocated to
CSXT in the
Division.(64)

In STB Finance Docket No. 33388 (Sub-No. 32), NW and B&OCT have filed a
notice of
exemption under 49 CFR 1180.2(d)(7) regarding the acquisition by NW of overhead
trackage
rights over approximately 10.8 miles of the IHB McCook Branch between the
IHB/B&OCT
connection at McCook, IL, at or near MP 28.5, and the IHB/CP connection at
Franklin Park, IL,
at MP 39.3.

In STB Finance Docket No. 33388 (Sub-No. 33), NW and B&OCT have filed a
notice of
exemption under 49 CFR 1180.2(d)(7) regarding the acquisition by NW of trackage
rights over
B&OCT's Barr Subdivision between the connection of the NSR Chicago Line and
the B&OCT
line at Pine Junction, IN (CP 497) and: (i) the connection with
B&OCT's McCook Subdivision
at Blue Island Junction, IL, at or near MP DC 14.9, a distance of approximately
14.9 miles; and
beyond to (ii) the B&OCT/IHB connection at McCook, IL, at or near
MP 28.5, a distance of
approximately 13.6 miles.

In STB Finance Docket No. 33388 (Sub-No. 34), CSXT and NW have filed a
notice of
exemption under 49 CFR 1180.2(d)(7) regarding the acquisition by CSXT of
overhead trackage
rights over approximately 45.5 miles of an NW line between Bucyrus, OH, at or
near NW MP
S-63.0, and Sandusky, OH, at or near NW MP S-108.5. The trackage rights to be
acquired by
CSXT, although described as "overhead" trackage rights, will allow CSXT to
access 2-to-1
shippers at Sandusky.

In STB Docket Nos. AB-167 (Sub-No. 1181X) and AB-55 (Sub-No. 551X),
CRC and
CSXT, respectively, have filed a notice of exemption under 49 CFR 1152.50 to
abandon an
approximately 29-mile portion of the Danville Secondary Track between
MP 93.00± at Paris, IL,
and MP 122.00± at Danville, IL, in Edgar and Vermilion Counties, IL. The
line, which is
presently owned and operated by CRC, is proposed to be operated by CSXT
pursuant to the
authority sought in the primary application.(65)

In STB Docket No. AB-290 (Sub-No. 194X), NW has filed a notice of exemption
under
49 CFR 1152.50 to abandon(66) a line between MP
SK-2.5 near South Bend, IN, and MP SK-24.0
near Dillon Junction, IN, a distance of approximately 21.5 miles in
St. Joseph and La Porte
Counties, IN.(67)

In STB Docket No. AB-290 (Sub-No. 196X), NW has filed a petition under
49 U.S.C.
10502 for exemption from the provisions of 49 U.S.C. 10903 to abandon a line
between MP TM-5.0 in Toledo, OH, and MP TM-12.5 near Maumee, OH, a
distance of approximately 7.5 miles in
Lucas County, OH.(68)

In STB Docket No. AB-290 (Sub-No. 197X), NW has filed a notice of exemption
under
49 CFR 1152.50 seeking authorization to discontinue operations over the Toledo
Pivot Bridge
extending between MP CS-2.8 and MP CS-3.0 near Toledo, OH, a distance of
approximately
0.2 miles in Lucas County, OH.(69)

APPLICABLE STANDARDS

The applicable statutory provisions are codified at 49 U.S.C. 11321-26.
Despite the
several factors contained in those provisions, "The Act's single and essential
standard of approval
is that the [Board] find the [transaction] to be 'consistent with the public
interest.'" Missouri-Kansas-Texas R. Co. v. United States, 632 F.2d
392, 395 (5th Cir. 1980), cert. denied, 451 U.S.
1017 (1981). AccordPenn-Central Merger and N & W Inclusion
Cases, 389 U.S. 486, 498-99
(1968). To determine the public interest, we balance the benefits of the
merger against any harm
to competition or to essential service(s) that cannot be mitigated by
conditions.(70)

In making our public interest determination in proceedings such as this one
involving the
merger of at least two Class I railroads, section 11324(b) requires us to
consider five factors:
(1) the effect of the proposed transaction on the adequacy of
transportation to the public; (2) the
effect on the public interest of including, or failing to include, other rail
carriers in the area
involved in the proposed transaction; (3) the total fixed charges that
result from the proposed
transaction; (4) the interest of carrier employees affected by the proposed
transaction; and
(5) whether the proposed transaction would have an adverse effect on
competition among rail
carriers in the affected region or in the national rail system.

Section 11324(b)(1), requiring that we examine the effect of the
transaction on the
adequacy of transportation to the public, necessarily involves an examination
of the public
benefits of the transaction. These include efficiency gains such as cost
reductions, cost savings,
and service improvements permitting a railroad to provide the same rail
services with fewer
resources or improved rail services with the same resources. An integrated
railroad can often
realize certain of these benefits by achieving the economies of scale, scope,
and density
stemming from expanded operations. Cost savings may include elimination of
interchanges,
internal reroutes, more efficient movements between the merging parties,
reduced overhead, and
elimination of redundant facilities. These benefits, in varying degrees
depending on competitive
conditions, have generally been passed on to most shippers as reduced rates
and/or improved
services.(71)

Competitive harm results from a merger to the extent that the merging
parties gain
sufficient market power to profit from raising rates or reducing service (or
both).(72) In evaluating
claims of competitive harm, our general practice is to distinguish harm caused
by the transaction
from disadvantages that other railroads, shippers, or communities may have
already been
experiencing. Wherever feasible, we impose conditions to ameliorate
significant harm that is
caused by the merger.

Our general policy statement on rail consolidations, codified at 49 CFR
1180.1,(73)
recognizes that potential harm from a merger may occur from a reduction in
competition,
49 CFR 1180.1(c)(2)(i), or from harm to a competing carrier's ability
to provide essential
services. 49 CFR 1180.1(c)(2)(ii).(74)
Thus, we must evaluate whether opposing railroads will be
financially and competitively able to withstand the projected loss of traffic
to the consolidated
system. In assessing the probable impacts and determining whether to impose
conditions, our
concern is the preservation of competition and essential services, not the
survival of particular
carriers. An essential service is defined as one for which there is a
sufficient public need, but for
which adequate alternative transportation is not available. 49 CFR
1180.1(c)(2)(ii).

Finally, because our statutory mandate requires a balancing of efficiency
gains against
competitive harm, the antitrust laws provide guidance, but are not
determinative in our merger
proceedings. As the Supreme Court noted in McLean Trucking Co. v. United
States, 321 U.S.
67, 87-88 (1944):

In short, the [Board] must estimate the scope and appraise the effects of
the
curtailment of competition which will result from the proposed consolidation and
consider them along with the advantages of improved service, safer operations,
lower costs, etc., to determine whether the consolidation will assist in
effectuating
the overall transportation policy . . . . "The wisdom and experience of that
[Board]," not of the courts, must determine whether the proposed consolidation
is
"consistent with the public interest."(75)

DISCUSSION AND CONCLUSIONS

OVERVIEW. After pursuing competing bids
individually to acquire all of Conrail, CSX
and NS reached an agreement to acquire Conrail jointly. The transaction they
are proposing will
result in a procompetitive restructuring of rail service throughout much of the
Eastern United
States. Before the transaction, CSX operated about 18,500 miles of track, NS
about 14,300, and
Conrail about 10,700. As proposed in this transaction, NS will control about
58% of Conrail's
lines, while CSX will control about 42%,(76) at
a total price of $9.895 billion, plus assumed
liabilities and transaction fees. After the transaction is fully consummated,
both CSX and NS
will provide vigorous, balanced, and sustainable competition, each over
approximately 20,000
miles of rail line in the East.

Before this transaction, Conrail faced no Class I rail competitor through
much of its
service area. This meant that Conrail was a "bottleneck" carrier for most
through shipments
moving to or from this area. Now, CSX and NS will directly compete with each
other in
important markets where Conrail did not compete with other major railroads
before. These
markets are the Northern New Jersey portion of the New York metropolitan area,
Southern New
Jersey/Philadelphia, Detroit, the area served by the Monongahela Railroad, and
the Ashtabula
Harbor. The total amount of rail traffic that will gain head-to-head two
railroad competition has
been estimated by applicants at $700 million per year.(77)

With very minor exceptions, the combination of NS and Conrail and of CSX
and Conrail
lines will be end-to-end and not parallel. It has been our experience that
end-to-end
restructurings of this kind rarely result in a diminution of competition. We
have adopted a
presumption, known as the one-lump theory, that vertical combinations will not
result in
competitive harm. We have also established a test for parties to show that the
theory does not
apply in a particular circumstance. Although several parties have attempted to
argue that we
should not apply the one-lump theory to rail mergers, repeating arguments that
have been raised
and rejected in previous merger proceedings, no party has rebutted the
application of the theory
here. Our use of the one-lump theory has been judicially approved, and we will
not go back over
that ploughed ground here. SeeWestern Resources, Inc. v. STB,
109 F.3d 782 (D.C. Cir. 1997).

In only a handful of instances, the restructuring would, unless
conditioned, result in a
reduction from two to one of carriers serving a particular location.
Applicants have agreed, and
we will ensure, that wherever that would happen, applicants will provide one
another sufficient
trackage rights at reasonable rates, together with any other conditions that
might be called for, to
remedy the situation. Because the transaction as conditioned will result in no
instances of
significant competitive harm, and will significantly increase competition for
many shippers, the
clear impact of this transaction is to create a substantial increase in
rail-to-rail competition, and
not a reduction.

In addition, the transaction will permit both CSX and NS to compete more
effectively
with motor carrier service, which is the dominant mode of freight
transportation for most
commodities throughout the East. The division of Conrail's lines, roughly half
to each carrier,
permits both CSX and NS to offer new and efficient single-line service in
competition with
motor carriers and with each other to thousands of shippers that received only
joint-line service
before. The transaction should lead to improved service and reduced transit
times for thousands
of shippers throughout the Eastern United States. This will permit these two
carriers to divert a
significant amount of traffic from the nation's highways.

Applicants project that expanded rail operations will result in removal of
1,027,000 truck
trips a year from our nation's highways, with 438,000 of that total attributed
to CSX and 589,000
to NS.(78) This diversion of traffic away from
the highways will result in substantial net
environmental benefits in terms of reduced air pollution and highway traffic
congestion, and will
reduce annual diesel fuel consumption by over 80 million gallons.(79)

These opportunities will also spur both CSX and NS to make substantial new
investments
in improving rail infrastructure. CSX plans to invest $488 million, while NS
plans to invest
$729 million in new rail property and equipment due to this transaction.
Indeed, several line
construction projects that we previously authorized are already well under
way. These important
public interest benefits of increased competition, new single-line routes,
reduced highway traffic,
and increased capital investment in needed facilities, are largely uncontested.

In addition, anticipated synergies will enable NS and CSX to reduce their
cost of
providing transportation by about $1 billion per year beginning in the third
year following
completion of the transaction. As we noted in Union Pacific Corporation,
Union Pacific
Railroad Company, and Missouri Pacific Railroad Company--Control and
Merger--Southern
Pacific Rail Corporation, Southern Pacific Transportation Company, St. Louis
Southwestern
Railway Company, SPCSL Corp., and The Denver and Rio Grande Western Railroad
Company,
Finance Docket No. 32760 (UP/SP),(80)
the clear trend since 1980 has been that railroad
efficiencies achieved through mergers or other means have been largely passed
along to shippers
in the form of lower rates and improved service.

Indeed, our monitoring of rail rates indicates that this downward trend has
continued
unabated since 1993, a time during which rail service in the West was totally
restructured with
two major rail mergers. We are mindful of the fact that the recent
UP/SP merger was followed
by serious service problems resulting from a variety of factors, a significant
one being a rail
infrastructure that is inadequate to meet the rapidly increasing demand for
rail service in the
West.(81) The railroads in the West, however,
have been upgrading their infrastructure, as they
indicated they would in the context of their merger proceedings, and we expect
service to
continue to improve as the infrastructure is upgraded.

Given the substantial savings predicted, which we have examined and have
found
generally to be reasonable projections,(82)
neither NS nor CSX should have any difficulty
financing the fixed charges resulting from the acquisition.(83) In fact, the transaction should
ultimately result in improved financial ratios for the major eastern railroads.

Although the impacts of this transaction are chiefly positive, protests or
responsive
applications have been filed by about 160 parties. Given the magnitude of this
undertaking, and
the ongoing service problems in the West, it is not surprising that numerous
parties would be
anxious about the substantial changes in rail operations that are projected.
Nevertheless, we
believe that many of these concerns are either overstated or unwarranted.
Where protestants
have raised valid competitive or other concerns, however, we have addressed
them with
conditions wherever appropriate.

In imposing various conditions, it has been our aim not to undermine the
strength and
integrity of the proposal before us, which clearly benefits the public
interest. In this regard, we
have not altered the already procompetitive SAAs carefully negotiated by
applicants. But, we
have used our broad conditioning authority to preserve or enhance service and
competitive
opportunities for areas in the Northeast that lost significant competitive
alternatives in the
railroad bankruptcies that led to the formation of Conrail in the 1970s. We
have either preserved
competition or provided for new competition to and from New York City, Buffalo,
and
Rochester, NY. We have also provided conditions aimed at protecting the
viability of small
carriers such as the Ann Arbor Railroad, the Wheeling & Lake Erie Railroad,
and the New
England Central Railroad. These and other small carriers provide valuable
services to shippers
on a regional basis. We have preserved service or competitive opportunities
for shippers such as
Indianapolis Power & Light Company, Wyandot Dolomite, AK Steel Corporation,
and Joseph
Smith & Sons, Inc.

Finally, we are aware that throughout the course of this proceeding,
applicants and
various parties have worked diligently to negotiate settlement agreements.
Those efforts have
resulted in a number of important agreements that should improve competition
and service
quality for shippers of freight and rail passengers. Chief among these
agreements are the NITL
agreement (permitting important remedies relating to oversight, loss of
single-line service, and
reciprocal switching), and the agreements with two major unions, United
Transportation Union
and Brotherhood of Locomotive Engineers (together representing almost half of
all railroad
employees). Applicants have reached settlement agreements with the National
Grain and Feed
Association, and with a number of electric utility companies such as Potomac
Electric Power
Company, New York State Electric and Gas, Atlantic City Electric Company,
Detroit Edison
Company, and Delmarva Power & Light Company.

Applicants have also reached an important agreement with Amtrak permitting
them to
provide freight service over the Northeast Corridor. At the same time, Amtrak
has gained an
agreement to permit it to conduct certain express operations over the lines of
NS. Applicants
also reached important agreements with the Port Authority of New York and New
Jersey, the
New Jersey Department of Transportation, the City of Cleveland, the City of
Indianapolis, and
with over 25 railroads, including the Canadian National Railway, the Canadian
Pacific Railway,
and many smaller railroads. These agreements, taken as a whole, will do much
to promote safe
and adequate service, and improved competition, well into the twenty-first
century.

GENERAL ISSUES

The NITL Settlement Agreement. CSX and NS have entered
into a number of
agreements with public agencies, shippers, and other railroads to improve
efficiency and service,
and to address safety and passenger concerns. Chief among these is the
settlement with the
National Industrial Transportation League (NITL), the nation's largest shipper
trade association.
The settlement covers a broad range of issues raised by NITL and other parties,
although NITL
has retained the right to pursue certain rate conditions.

Generally, the provisions of the NITL agreement are in the public interest,
and we will
impose them as conditions to our approval of this transaction. In certain
areas touched on by that
agreement, however, we believe that some additional general remedies are
required. As
explained in more detail below, we have modified that agreement in four basic
ways. First, at the
urging of many parties including the United States Department of
Transportation, the Chemical
Manufacturers Association, and others, we have extended the oversight period
from 3 to 5 years.
Second, we have extended the single-line to joint-line and reciprocal switching
protections,
which were crafted with NITL's shipper members in mind, to reach shortlines
that connect with
Conrail and the shippers that they serve. Third, we have revised the
reciprocal switching
provision so that it protects not just switching that has been provided by
Conrail to CSX and NS,
but also switching that has been provided by CSX and NS to Conrail, where
feasible. Fourth, we
are revising applicants' plan for allocation of Conrail shipper contracts
between NS and CSX, by
permitting only a temporary override of antiassignment provisions and other
similar provisions
that would unduly impede the carrying out of the transaction.

The NITL agreement, as expanded by the Board, provides the following:

Consultation With Shipper Representatives. The settlement led to
the creation of a
"Conrail Transaction Council" consisting of representatives of the railroads,
NITL, and other
organizations representing affected rail users. CSX and NS are to discuss the
implementation
process with the Council, which may suggest mechanisms to address any perceived
obstacles to
the effective and efficient implementation of the transaction. Although the
Council is not
intended to supplant our oversight of implementation, it nonetheless furthers
the public interest.
If shippers and carriers have a forum for timely and efficient communication of
information,
problems are more likely to be resolved without requiring our intervention.

Additional Plans For The Shared Assets Areas. Under the
agreement, applicants have
already provided to the Council on February 1, 1998, a summary description of
how operations
will be conducted in each of the three Shared Assets Areas (SAAs), North
Jersey, South
Jersey/Philadelphia and Detroit. These summaries -- describing the
interrelationship of the two
railroads, dispatching controls and the effects on individual shippers in these
areas related to car
ordering, car supply, and car location -- have facilitated shipper planning,
and have allowed
more meaningful public comment on safety and operational issues.

Preparation For Separate Operations. The NITL agreement provides
that, prior to the
start of separate operations over the Conrail lines, CSX and NS
will advise us that:
(1) management information systems are in place for operations on the
former Conrail system,
within the SAAs, and at interchanges between the CSX/Conrail and NS/Conrail
systems,
including car tracing capabilities; and (2) they have obtained the
necessary labor implementing
agreements. If either CSX or NS requests that we take steps to initiate labor
implementing
agreements prior to the control date, NITL will support that request. CSX and
NS will,
consistent with safe and efficient implementation of the transaction, initiate
their separate
operations of the Conrail routes as soon as possible after control has been
authorized. This
condition will assure that the transaction is implemented in an orderly manner,
and only when
applicants have in place the two most important prerequisites for successful
implementation:
labor agreements and computerized information systems.

Board Oversight - Development of Measurable Standards. The
agreement proposes that
we require oversight of the transaction for a 3-year period. We believe,
however, that a 5-year
oversight period would be more appropriate. As part of that oversight, the
parties suggest that
we require quarterly reports from CSX and NS and an opportunity for comment by
all interested
shippers. CSX, NS and the Council have agreed jointly to develop and recommend
to us
objective, measurable standards to be used in the quarterly reports, with the
baseline to be the
current Conrail operations. Given the operational complexity and the broad
scope of this
transaction, we believe that continuing oversight is necessary.

To ensure that the Council continues to serve its intended purpose as an
adjunct to our
oversight of service implementation, we will require applicants to continue
their participation in
the Council process until the Council certifies to us that the service-related
aspects of the
transaction have been successfully implemented. The Council shall report to
us, as necessary,
any impediments to service implementation requiring exercise of our continuing
oversight
jurisdiction, with recommendations as to how that jurisdiction should be
exercised.(84)

Conrail Rail Transportation Contracts. Applicants propose to
allocate Conrail rail
transportation contracts pursuant to section 2.2(c) of the transaction
agreement. Under the NITL
agreement, shippers that could have had their contracts allocated to either of
the two carriers
under section 2.2(c), and who become dissatisfied with the service they
are receiving from the
carrier to which their contract's performance is allocated, may, at any time
after 6-months'
experience, submit to arbitration on an expedited basis the issue as to whether
there is just cause
for the transfer of responsibility for service to the other carrier. With
regard to the Conrail
contracts distributed between CSX and NS, this provides a useful remedy for
contract shippers
that are unhappy with the performance of the carrier serving them.

As explained in more detail in the Shipper Contracts section below, we have
modified
applicants' proposal to permit an override of antiassignment and other similar
clauses in existing
contracts, so that only a temporary override will be permitted. At the end of
180 days after Day
One, the day on which Conrail assets are divided, shippers will be permitted
freely to exercise
whatever termination rights those contracts may contain, provided they have
given 30 days'
notice to the carrier of their intentions. Shippers in those circumstances
will not need to make a
showing that their service is inadequate in order to terminate the contract.

Interline Service. Because of the allocation of Conrail's routes,
a number of shippers that
currently have single-line service from Conrail on certain moves will no longer
have single-line
service available. Those shippers who have shipped at least 50 cars on an
annual basis on the
routes in question, if they request, may require CSX and NS to maintain the
existing Conrail
rates, subject to RCAF-U(85)

increases. Applicants will also work with the shippers to provide fair
and reasonable joint-line service, for a period of 3 years. An arbitration
procedure is established
for disputes concerning the routing or interchange points for these shippers.
As discussed below,
these provisions are a creative remedy for a problem that does not generally
lend itself to easy
solutions.

After examining the record in this case as it relates to shortline
railroads, we have
determined that these remedies should be extended to single-line to joint-line
situations also
involving a third carrier that is a Class III railroad. Shippers on Class III
railroads in those
circumstances would face the same degree of harm as do shippers that are losing
single-line
Conrail service through the transaction, and this slight expansion of the NITL
agreement
provides an appropriate remedy. In other words, where a Class III railroad
could provide through
service connecting solely with Conrail, but will now have to provide a
three-carrier connecting
service with both CSX and NS, the Class III carrier, at its option, will be
able to invoke the
single-line to joint-line protections set forth in the NITL agreement.

Gateways. CSX and NS have agreed to keep open all major
interchanges with other
carriers as long as they are economically efficient. This comports fully with
our statutory
mandate to preserve efficient routings. See, e.g., Chesapeake
& O. Ry. v. United States, 704
F.2d 373, 377 (7th Cir. 1983).

Reciprocal Switching. The NITL agreement enhances competition to
the extent that it
preserves for 10 years those arrangements under which Conrail made reciprocal
switching
available to NS and CSX. It also generally reduces Conrail's switching rates,
which range up to
$450 per car and tend to be around $390, to $250 per car, with an inflation
adjustment, for the
next 5 years. This aspect of the agreement is beneficial because, at least in
some cases, the
transaction may change the rail transportation map in ways that reduce the
incentive of CSX and
NS to grant reciprocal switching to each other at certain locations where
Conrail granted such
switching rights to one of them before the transaction. Reciprocal switching
is generally a
voluntary arrangement that carriers undertake when it is in their own best
interest. Conrail,
because of its very strong competitive position, has generally been unwilling
to grant switching
rights to other carriers without charging relatively high rates for that
service.

CMA, SPI and certain other parties have argued that we should do more to
preserve or to
enhance existing reciprocal switching arrangements in this proceeding. Several
parties have
pointed out that the preservation of switching arrangements guaranteed by the
NITL agreement
works only in one direction. Switching granted by Conrail to NS and CSX would
be preserved,
while switching granted by NS and CSX would not be. It may be that there are
considerably
fewer situations where NS and CSX agreed to perform switching for Conrail, but
there are
situations where such arrangements did provide valuable competition. For
example, ARCO
Chemical Company operates a facility in South Charleston, WV, that is now
served directly by
CSX, and which is open to reciprocal switching to Conrail. NS will be
obtaining the Conrail
line. Under the NITL agreement, this switching would not be preserved.

We believe that it is appropriate for us to expand the NITL agreement to
require, where
feasible, preservation of switching agreements in both directions -- NS and CSX
over Conrail
and Conrail over NS and CSX -- under the same terms provided for in the NITL
agreement.
Applicants correctly point out that relief for cancellation of switching
arrangements is available
through 49 CFR 1144 under certain circumstances, but we see no reason to
require shippers to
use that process to remedy situations where switching disappears as the result
of a merger or
consolidation such as this one.

There are a limited number of circumstances in which shortline railroads
now pay
switching charges to Conrail. We believe that a similar logic compels
preservation of these
switching arrangements and rate accommodations to the same extent provided for
in the NITL
agreement when the switching only involves Conrail and CSX or NS. We caution
that we do not
intend by this provision to undo or override "blocking provisions" in contracts
by which
shortline railroads obtained their rail properties from Class I railroads.(86)

Finally, several parties have asked that we reduce the level of switching
charges to $130
per car, roughly the level that UPRR agreed to charge BNSF in a settlement
agreement that we
imposed as a condition in the UP/SP merger. Other than this one
comparison, these parties have
presented no evidence to indicate that a $130 fee would be appropriate for
these eastern carriers
or that a $250 fee would not be appropriate. We have no reason to believe that
the $250 fee that
these two carriers have voluntarily negotiated(87) with NITL for services they provide for each
other is unreasonable or should be reduced. One thing is quite certain: the
$250 fee is in almost
every case lower than the switching fees that Conrail charged before this
transaction. Thus, the
new fee facilitates rail-to-rail competition.

Facilities Within The Shared Assets Areas. During the term of the
operating agreements
for the Shared Assets Areas, all existing and new shipper-owned
facilities within the areas may
be served by both CSX and NS. This clarification promotes competition by
giving shippers and
both carriers the opportunity to invest in joint facilities or for the carriers
to develop for their own
use facilities that they will separately own or control in the area, such as
transloading facilities or
ramps for automotive traffic.

In sum, the NITL agreement, as expanded by us, provides significant
benefits both to the
parties and to the public. As outlined above, the agreement preserves
interchanges and reciprocal
switching arrangements, reduces many switching charges, and provides efficient
joint-line
service and fair pricing to Conrail shippers affected by the allocation of
Conrail lines between
CSX and NS. The benefits of the NITL agreement apply to all shippers meeting
its terms; they
are not restricted to NITL members only.

The terms of the agreement extend beyond traditional conditions that have
been imposed
by us or the Interstate Commerce Commission (ICC) in previous consolidation
proceedings. The
agreement carries out our direction that, whenever possible, disputes should be
resolved by
negotiated settlement between affected parties, rather than addressed by a
resolution imposed by
government decree. To this end, we commend applicants and NITL for entering
into an
agreement that addresses broad-based shipper concerns, without delaying the
transaction and the
public benefits it should bring.

Additional Broad Issues Raised By Various Shipper Trade
Associations. Chemical
Manufacturers Association (CMA), the Society of the Plastics Industry (SPI),
and other shipper
organizations raise numerous issues and request extensive conditions. Many of
these issues and
conditions have been advanced by others and are discussed elsewhere.(88) In light of the NITL
agreement and the relief that we have accorded in other parts of this decision,
none of these
additional conditions is necessary or appropriate to avert merger related harm.

Request To Adopt Existing Rates. One condition CMA and SPI
propose would require
CSX and NS to adopt all existing Conrail tariffs and circulars that were in
effect when the
application was filed and to publish supplements incorporating any new routes.
We agree with
applicants that such a condition would not further competition. The proposal
would result in
CSX and NS being required to charge, at least as an initial matter, identical
rates for movements
that both could handle. This condition will not be imposed.

Service Concerns: Pre-Implementation Protocols. CMA and SPI seek
conditions
requiring CSX and NS to establish, prior to implementation of the transaction,
management and
operations protocols, safety and labor implementing agreements, and car
tracking systems
applicable to their respective portions of Conrail. All of these issues have
been appropriately
addressed by the NITL agreement. The CMA and SPI proposal and that of certain
other parties,
such as the National Mining Association, differ from the NITL agreement in
calling for extensive
additional regulatory procedures to be completed before applicants are
permitted to implement
their transaction.(89) Although we are well
aware of the service problems that have been
experienced in the West, imposing a cumbersome regulatory process that would
lead to
substantial delays in the transaction and would unduly interfere with
applicants' operational
flexibility to respond to changing conditions could easily create, rather than
inhibit, service
problems.

Applicants have already submitted detailed operating plans and, at our
direction, they
have provided a comprehensive operating plan for the North Jersey SAA and three
extensive
Safety Integration Plans (SIPs). Moreover, as previously noted, applicants
have reached an
agreement with NITL that includes a significant number of pre-closing
undertakings, which we
believe are more than adequate to address the service concerns of CMA and SPI.

Alleged Harm To Chemical And Plastics Shippers. We also agree
with applicants that
CMA and SPI's claims that chemical and plastics shippers will be harmed by this
transaction are
highly inaccurate. Many of these shippers will receive a significant net
benefit by receiving two-carrier service at facilities previously served by
only one carrier. Moreover, the study used by
CMA and SPI to buttress their claims of transaction-related harm is flawed
because only Conrail
traffic was considered and because it rests on economic theories that we have
already rejected.
We agree with applicants that CMA and SPI's errors result in understatement of
the service and
competitive benefits of the transaction, and overstatement of the negative
effects on Conrail's
chemicals and plastics traffic.

The study is mainly a calculation, based solely on the Conrail waybill, of
the amount of
traffic (1) that would lose single-line service; or (2) would supposedly suffer
inferior service. As
to the first issue, we have acknowledged that, as a general matter, single-line
service is superior
to joint-line service. As discussed below, in the section entitled Single-Line
To Joint-Line
Issues, this transaction will result in about six times as many shipments going
from joint-line
service to single-line service as from the reverse. Many of the chemical and
plastics shippers
who lose the opportunity to use single-line service at some locations will gain
it at others. We
find here that, on balance, shippers would suffer only relatively modest harm
from losing single-line service, and that the NITL agreement is an appropriate
remedy. With regard to the service
issue, protestants seem to be saying that service will necessarily be worse
whenever a SAA is
involved. Having studied applicants' operating plans for the SAAs, we disagree
with this
premise.(90)

CMA and SPI also contend that applicants, to extend their length of haul,
will attempt to
shift traffic away from the St. Louis and Illinois gateways to New Orleans and
Memphis. They
seem to concede that applicants will not choose to use inefficient gateways and
routings because
of the new opportunities made possible by this transaction. Nonetheless, they
allege that these
new routings will lead to higher rates and to reduced competition as western
carriers insist on
retaining their existing divisions and NS and CSX insist on higher divisions
for their longer
hauls. But there is no basis in fact or economic theory to support the
contention that NS and
CSX, in conjunction with the western railroads, will find it necessary, much
less will gain the
ability, to raise through rates if these shifts occur. If overall costs are
reduced through creation of
more efficient through routes, we would expect through rates to decrease, not
increase.

The ICC carefully examined and rejected arguments similar to those made
here in Traffic
Protective Conditions, 366 I.C.C. 112 (1982), aff'd in relevant partDetroit, T. & I.R.R. v. United
States, 725 F.2d 47 (6th Cir. 1984) (DT&I). As the ICC found
there, the freezing of gateways
and routes through regulatory decree has extremely anticompetitive consequences
by precluding
carriers from making efficiency and service improving routing changes and
related rate
reductions. We continue to believe that carriers involved in mergers and
consolidations such as
this one should be allowed the flexibility to determine what gateways and
routings are most
efficient given their newly restructured systems. Although not all connecting
carriers benefit
from this shifting of traffic, shippers do benefit from this process.

In any event, CMA and SPI's alleged harm to these shippers is greatly
outweighed by
applicants' showing that 73,200 carloads, or 21%, of chemicals and plastics
traffic will benefit
from enhanced competition, primarily because of the competition between the new
NS and CSX
systems for traffic moving to, from, or between SAAs. We have carefully
scrutinized and
rejected claims that the new procompetitive operations within SAAs are likely
to lead to
significant service failures. Applicants have also shown that no chemicals or
plastics traffic
would receive reduced competition by losing two-carrier service. The bottom
line is that plastics
and chemical shippers will be better off, not worse off, due to this
transaction.

Transload, Build-out, And New Facilities Conditions. Clay
Products Traffic Association
(CPTA) and The Fertilizer Institute (TFI) ask us to impose the same transload,
new facility, and
build-out conditions that were imposed in UP/SP.(91) Although CPTA and TFI concede that the
number of 2-to-1 points in this proceeding is very small, they argue that
shippers whose
competitive options are reduced as a result of the transaction should receive
no less protection
than was afforded shippers whose competitive options would otherwise have been
restrained in
UP/SP.(92)

Where shippers (such as Joseph Smith and Sons, as discussed below) have
provided
evidence that they would be losing a particular build-out option, we have
imposed a condition to
remedy that specific situation. But CPTA and TFI have not provided any
particular evidence or
other basis to support their requested generic conditions. The broad
build-out, new facility, and
transload conditions imposed in UP/SP were imposed in part to ensure
sufficient traffic density
for BNSF to operate effectively over thousands of miles of trackage rights
granted to remedy
widespread 2-to-1 effects in that merger. UP/SP, Decision No. 44, slip
op. at 145. More
importantly, they were imposed to replicate indirect forms of competition that
were lost because,
before the merger, shippers solely served by just one of the two merging
carriers could
nevertheless transload shipments to, relocate on, or build out to, the nearby
lines of the other
carrier. See, e.g., UP/SP, Decision No. 44, slip op. at
106. Without these conditions, the service
provided by BNSF over trackage rights -- limited as they were to service at
2-to-1 points --
would not have replicated all of the lost competitive opportunities. And
BNSF's own lines were
often simply too far away to offer effective competitive safeguards to shippers
contemplating
build-outs or new facilities.

There is no record here of any comparable loss of competition because
shippers that had
nearby carriers to which they could transload or build-out before the
transaction will continue to
have those opportunities. Unlike the situation in UP/SP, the geographic
areas and related
remedial trackage rights are extremely limited, and the carriers' lines are
relatively close together.
Indeed, the SAAs created by this transaction actually expand competitive
opportunities, and the
NITL agreement ensures that new shipper-owned facilities within those areas can
be served by
both CSX and NS.

Other Issues. CMA and SPI raise an issue of potential congestion
at Harrisburg, PA,
which will be served by NS, but they offer no evidence to support this
contention. Their
conjecture is contradicted by the fact that NS will be investing $40 million to
develop a new
intermodal exchange facility east of Harrisburg to ensure that traffic in this
area is handled
efficiently.

CMA and SPI point to possible clearance problems on the Lehigh Line. The NS
Operating Plan provides for various improvements on this line, including
upgrading to permit
doublestack clearance through the Musconetcong Tunnel at Pattenburg, NJ, at a
cost of $31.7
million. CSX/NS-20, Vol. 3B at 201-202. This upgrading to permit
double-stacking will allow
more freight to be handled with fewer trains, thus alleviating concerns of
congestion on this line.

Institute of Scrap Recycling Industries, Inc. (ISRI) requests that the SAAs
be expanded to
include the facilities of three members: Louis Padnos Iron & Metal,
William Reisner
Corporation, and Royal Green Corporation. The broad issue of requests to be
served by both
CSX and NS will be discussed below. Although ISRI claims that these facilities
may be
disadvantaged by having to compete with facilities that are in SAAs, there is
no allegation or
evidence that these shippers will suffer a reduction in rail competition. All
three currently
receive service from one rail carrier, a situation that will not be changed by
the transaction.

The Acquisition Premium. Several protestants, including
two large trade associations,
NITL and CMA, have argued that the transaction is contrary to the public
interest because CSX
and NS have paid a large "acquisition premium" for the Conrail properties.(93) They have argued
that both of these carriers will be forced to raise their rates to captive
shippers in order to make
up their revenue shortfall and finance this investment. Moreover, these
parties argue that the
addition of these Conrail properties to the CSX and NS investment bases will
erode shippers'
regulatory rate protections. They claim that inclusion of the new value of
parts of Conrail in the
investment bases of NS and CSX will both move the carriers further from meeting
our revenue
adequacy standards and increase the level of the jurisdictional threshold
(below which rates are
conclusively presumed to be reasonable). 49 U.S.C. 10707(d)(1)(A).
Protestants claim that CSX
and NS will now be able to charge higher maximum rates on captive traffic than
Conrail was
able to charge.

As a threshold matter, the basic premise of these parties -- that CSX and
NS will be
unable to finance this investment without gouging shippers by taking advantage
of merger
related changes in the investment base used for rate regulatory purposes -- is
simply not true.
Applicants have provided ample evidence to demonstrate that they will have much
more than a
sufficient flow of funds to meet their financial obligations without having to
raise rates to
shippers at all.(94) Moreover, both CSX and NS
should ultimately be financially stronger because
of the synergies that the merger permits. And those two new systems together
should be
financially stronger, more efficient and more competitive than were the three
carriers that
previously provided service in the East.

Indeed, because the transaction significantly reduces rail market power in
the East, and
because relatively few shippers were captive to rail even before this
transaction, CSX and NS
could not successfully pursue a strategy of making up a revenue shortfall
simply by increasing
their rates to captive shippers. Protestants' suggestion that applicants would
pay a multi-billion
dollar "premium" based upon the expectation of extracting increased monopoly
rents (because of
adjustments in the regulatory rate base) from the very small number of shippers
that are truly
captive is not credible. CompareFPC v. Hope Natural Gas
Co., 320 U.S. 591, 601 (1944)
(circularity problem where acquisition price based upon prospect of increased
monopoly returns
in utility merger). Given the fact that very few rail shippers are captive
shippers whose rates ever
require regulatory intervention, paying too much for a property in hopes of
extracting increased
rents would be a self-defeating strategy in the rail industry.

These same parties have asked us to change our basic accounting rules to
disregard the
increased valuation of the former Conrail assets based on their recent sales
price when we make
revenue adequacy and jurisdictional threshold determinations. That relief
would be
inappropriate, and will not be granted. The Board's Uniform System of Accounts
(USOA),
adopted in conformity with generally accepted accounting principles (GAAP),
requires that the
former Conrail assets be valued based on their recent acquisition cost, not
upon Conrail's book
value. Indeed, the ICC's decision to follow the recommendation of the Railroad
Accounting
Principles Board (RAPB) to use acquisition cost, not book value, in this
precise context,
supported by NITL and others, was judicially affirmed. SeeAssociation of American Railroads
v. ICC, 978 F.2d 737 (D.C. Cir. 1992).

Petitioners have presented no valid grounds for reversing this policy now
other than a
strictly result-oriented one. Because the Conrail assets will now be assigned
a higher value than
they were before, the dollar amount represented by 180% of variable cost(95) would be somewhat
higher. They also argue that these carriers will be further from revenue
adequacy, thus
undermining their opportunity to get rate relief. As explained in more detail
below, in making
these arguments, protestants ignore the fact that any increase in URCS variable
cost due to
transaction-related changes in the value of road property investment will be
offset by reductions
in URCS cost elements as the $1 billion in merger synergies flow through the
costing system.
Applicants' revenue adequacy will be aided by these savings and by additional
traffic generated
by the transaction.

1. The Jurisdictional Threshold. Although protestants give the
impression that the
acquisition premium will have a very large impact on the jurisdictional
threshold, we do not
agree with their analysis. Only IP&L witness Crowley attempted to measure
the actual impact
that application of purchase accounting rules to this transaction is likely to
have on the
jurisdictional threshold. Based on his study of one hypothetical 350-mile
unit-train coal
movement, Crowley asserts that URCS variable cost, and thus the jurisdictional
threshold, would
rise by about 15% on CSX and 24% on NS.(96)

Although applicants have shown numerous errors in Crowley's calculations,(97) they have
not presented their own study. We have made calculations on a system-wide
basis for both CSX
and NS. Using the building blocks for URCS costing (the railroads' 1995 R-1
Forms) and
applicants' statement of how they will allocate the purchase accounting
write-up among various
asset classes, we have allocated the acquisition premium based on applicants'
planned 58/42%
split of Conrail's assets. Our calculations, detailed in Appendix N, show that
the acquisition
premium will lead to increases in URCS system-wide costs -- and of the
jurisdictional threshold
for an average movement -- of 4.9% for CSX and 7.26% for NS.

These numbers reflect a worst case basis, where none of the merger
synergies are
achieved. Even on this basis, the jurisdictional variable cost threshold will
be only a slightly
higher dollar number in particular cases.(98)
Of course, we believe that it is likely that these
merger efficiencies will be achieved, and that these and other efficiencies
obtained by the
railroads will continue to push the level of rates represented by this
jurisdictional threshold
down. The railroad industry has exhibited remarkable productivity growth since
1980, and these
cost reductions have led to significant and continued declines in
inflation-adjusted URCS
variable cost -- and thus in the jurisdictional threshold -- over that entire
period. For the period
1985 to 1997,(99) inflation-adjusted URCS
variable cost has fallen by about 3% per year for every
category of traffic examined.(100) These
reductions have been so substantial that each category of
traffic has experienced a reduction of 1.3 to 16.3% in its URCS variable cost
over this period,
even before adjusting for inflation. Accounting for inflation, these
reductions are dramatic. The
increases in the jurisdictional threshold brought about by the acquisition
premium would amount
to only 2 or 3 years of normal productivity growth that has flowed through to
URCS costing over
the last 17 years.

The statute specifically limits our rate regulation to situations where the
rate exceeds
180% of the variable cost of service, and the statute also directs that we
conduct our costing in
accordance with GAAP to the maximum extent practicable. See49
U.S.C. 10707(d)(1)(A) and
49 U.S.C. 11161 (accounting). The relief that protestants are requesting would
seem to
contravene these specific statutory directives. Even if we were inclined to
consider a basic
change in our accounting rules, it would not be appropriate to do so for these
applicant carriers
alone in the context of this transaction.

2. Revenue Adequacy. Protestants also claim that the addition of
the Conrail assets to the
CSX and NS rate bases will preclude these two carriers from being found revenue
adequate,
which they argue will also hinder the ability of captive shippers to obtain
rate relief, although
they do not explain why this is so. Neither the Board nor the ICC has ever
decided a maximum
rate case based upon whether the defendant carrier or carriers was or was not
revenue adequate.
The fact that a carrier is revenue inadequate has never been used as a reason
to deny or limit the
scope of maximum rate relief.

Moreover, protestants have overstated the impact of recalibration of the
Conrail property
values in this transaction on the revenue adequacy status of NS and CSX.
Protestants ignore
altogether two important offsets, merger synergies and new traffic that will be
developed because
of the merger. Applicants have shown that when these elements are considered
and put in place,
the revenue adequacy status of CSX and NS will be largely unchanged.

In any event, the statute dictates that our regulation overall should give
railroads the
opportunity to earn the current cost of capital on their investments in rail
property. 49 U.S.C.
10101(3), 10701(d)(2), 10704(a)(2). If we were to adopt a policy of using the
predecessor book
value of property obtained through a merger or consolidation for various
regulatory purposes,
then this could deter efficiency enhancing transactions such as this one.
Stated another way,
carriers cannot attract and retain capital unless they are given the
opportunity to be compensated
for the real value of the property, not just the book value.

3. Fairness Of Purchase Price. Implicit in protestants'
arguments is the suggestion that
the purchase price was excessive. Protestants have submitted no evidence to
support the notion
that the purchase price that was negotiated at arm's length for Conrail is not
an accurate reflection
of the worth of that property. Certainly it is a more accurate reflection of
value than Conrail's
historic book value. Book values reflect accounting estimates of depreciation,
maintenance, and
obsolescence. These estimates may vary significantly from the current economic
value of the
assets; applicants have presented substantial testimony to show that the book
value of Conrail's
assets, even without the merger, was understated.(101) More importantly, predecessor book value
totally disregards merger synergies, which appear to be substantial here. In
sum, the purchase
price agreed to by these commercially sophisticated railroads represents by far
the best evidence
of the current market value of these properties.

4. Conditions Requested. For essentially the same reasons, NITL,
CPTA, TFI, and ISRI
ask us to impose, for a minimum of 5 years, a rule establishing a presumption
of market
dominance for any CSX or NS shipper served by only one railroad if the
shipper's rate is
increased by an amount greater than the RCAF-U index, or in the case of TFI,
the RCAF-A
index. NITL and ISRI also seek to shift the burden of proof on rate
reasonableness issues from
the complaining shipper to the railroad in cases where the rate for a market
dominant shipper has
increased by an amount greater than the RCAF-U index.

These conditions would all be inconsistent with our maximum rate
standards. Under the
statute, a shipper challenging a rate as unreasonably high has the burden of
proving market
dominance. Moreover, section 10707(d)(1)(a) precludes us from making a finding
of market
dominance unless the rate exceeds the 180% of variable cost threshold. Thus,
the broad changes
protestants seek are directly inconsistent with the statute. In any event,
these parties have not
offered sufficient evidence to support the unprecedented relief of taking away
from CSX and NS
alone the rate flexibility afforded to all rail carriers under the Act.

NITL's argument that our present market dominance and maximum rate
standards have
become too costly and complex and should be simplified reveals that its
proposed remedy is
directed more to its general dissatisfaction with our rate standards than to
actual competitive
harms that would result from the transaction. We are dealing with those
general concerns in
other proceedings.(102)

Summary. Having looked at these issues in great detail, we are
convinced that the
remedies that various parties have proposed are unnecessary and extreme.
Nevertheless, even
though we do not believe it likely that their statutory rate protections will
be substantially eroded
by the economics of this major restructuring, we will continue carefully to
assess the impact of
this transaction on both the jurisdictional threshold and the revenue adequacy
status of NS and
CSX, and incorporate this within the oversight condition that we are imposing
here.

Vertical Competition Issues. While a number of parties
served exclusively by Conrail,
such as Dekalb Agra and JStar Consolidated, Inc., have alleged that the
end-to-end joining of
CSX or NS with the Conrail line segments serving them will result in the loss
of beneficial origin
or destination competition between CSX and NS, only the verified statements of
IP&L witnesses
Crowley and Kahn/Dunbar attempt to provide any analytical basis or empirical
evidence to
support that notion. IP&L uses this evidence to argue that, once NS and
CSX vertically integrate
with the Conrail lines assigned to them, they will be able to add to the market
power of the
destination monopoly railroad and proceed to use this to raise rates. As we
explain below,
applicants have successfully refuted this evidence.(103)

Both Crowley and Kahn/Dunbar examine patterns in coal transportation prices
between
1991 and 1995 to Conrail destinations, concentrating on comparisons of rates
originating on
what was once the Monongahela Railway (MGA), but is now part of Conrail, with
rates from
other sources.

A key problem with these studies is that there is no "before" in what
purport to be "before
and after" comparisons. Crowley appears to have confused an October 1991 ICC
decision
approving the merger of MGA into Conrail(104)
with an earlier August 1990 ICC decision
approving the control of MGA by Conrail.(105)
Because Conrail controlled MGA at all times
covered by the study, the rate comparisons in these studies are of no benefit
in assessing the
vertical effects of a merger.

As correctly noted by applicants' witness Kalt, the changes reflected in
those comparisons
are explained by the evolution of eastern coal and rail transportation markets,
not by any vertical
merger. Coal produced in the Monongahela region has desirable characteristics
that have led to a
growing demand for this coal. The large mines in the area use longwall mining
techniques that
have resulted in low and falling costs of production. And passage of the Clean
Air Act
Amendments of 1990 forced many domestic electric utilities to reevaluate their
coal supply
decisions. The high-BTU, mid-sulphur, low cost coal from the Monongahela area
experienced
increases in demand both in coal export markets and for use in blending with
low-sulphur, low-BTU coal to meet Clean Air Act compliance standards.

Consistent with this scenario, Crowley reports that coal originations on
what were MGA
lines increased by over 60% from 1991 to 1995. Crowley's study simply verifies
that railroads
have more flexibility to raise coal transportation rates for coals with rising
demand and falling
costs of production. Kalt has shown that changes in coal transportation rates
on the Conrail
system have broadly tracked the changes in coal markets discussed above. Coal
rates for
movements originating in the Monongahela region have risen as demand for that
coal has
continued to grow, while average rates for certain other regions have fallen in
sync with demand
for and production of coal from those regions.

Kahn/Dunbar have performed additional tests aimed at measuring economic
profits for
carriers involved in single-line and joint-line coal movements. Kalt has shown
that these tests
are conceptually flawed, and filled with data, sampling, and calculation
errors. CSX/NS 176,
R.V.S. Kalt at 51-53. Kahn/Dunbar's conceptual errors involve the
misinterpretation of the
court-approved one-lump theory that we and the ICC have consistently applied
for over 15 years
to judge the vertical effects of railroad mergers. As the ICC summarized this
theory in Union
Pacific -- Control -- Missouri Pacific; Western Pacific, 366 I.C.C. 462,
538-39 (1982)
(UP/MP/WP):

A carrier with a destination monopoly will likely push the through rate as
high as
possible and keep the monopoly profits to itself by playing off the competing
connecting carriers against one another in setting divisions. . . .

We are not convinced either that a carrier with a destination monopoly for
steam
coal traffic will generally be unable to execute the described rate strategy
or, on
the other hand, that a neutral destination carrier that is unable to execute the
strategy would be significantly more capable of raising the through rate...
after affiliation with an origin carrier. . . . [emphasis added]

Therefore, the market power faced by an existing utility is not created, or
increased by, consolidation of a monopoly destination carrier with an origin
carrier.

Kahn and Dunbar have focused on the relative contributions earned by Conrail
vis-a-vis its
connections. They emphasize that Conrail's connecting carriers were often able
to achieve
profitable returns even where they connected with Conrail as a bottleneck
carrier. But, as
emphasized above, the one-lump theory does not predict that bottleneck carriers
will always be
able to execute a perfect price squeeze; it merely predicts that vertical
integration will not
increase the bottleneck carrier's market power over shippers.(106) In the end, Kahn/Dunbar have
failed to show how the transaction would increase the market power of railroads
over shippers.(107)

Finally, Kahn/Dunbar are simply wrong in asserting that the general
applicability of the
one-lump theory to mergers requires a set of explicit and rather implausible
assumptions, and
thus "the circumstances in which the pure one-lump theory is likely to hold
represent an 'extreme
example.'" They appear unaware that this very argument has been considered and
rejected by the
ICC, with the ICC's reasoning specifically affirmed by the court.(108) We conclude that the
Crowley and Kahn/Dunbar testimony falls far short of providing a basis for
altering our basic
economic analysis of the vertical aspects of railroad mergers.

Requests To Be Served By Both CSX And NS. A large number
of protestants are
shippers or local communities that have argued that the transaction will harm
them by creating
new competitive rail service that will help their competitors or the
competitors of shippers
located in their communities. Accordingly, these shippers and communities have
sought, bit by
bit, what altogether would amount to thousands of miles of trackage rights or
shared rail lines for
the purpose of extending the benefits of joint service areas to them.(109) These parties in effect
have said, "it would not harm the applicants very much to give this relief,
which they have
provided to others, to me as well."

The ICC and the Board have consistently declined to attempt to equalize the
rail
transportation options of shippers who receive merger benefits with all those
who do not. For
example, in BNSF, slip op. at 99, the ICC denied relief to Bunge
Corporation, which claimed
that it would be harmed solely because the merger would aid a key competitor.
The ICC
explained that this is not the kind of harm that the agency rectifies under its
conditioning power.
Indeed, it is extremely unlikely that procompetitive applications such as this
one would ever be
forthcoming if we were to adopt a general, broad equalization policy as these
protestants are
suggesting.

Applicants have proposed a restructuring that makes sense for them as an
economic and
an operational matter, while at the same time creating new rail competition for
several major
cities and many hundreds of shippers. In creating this structure, applicants
are not creating new
market power and are willing to give up some of the existing monopoly power of
the Conrail
franchise. If we were to require trackage rights by a second carrier for every
shipper or
community that competes with shippers who benefitted by the transaction, it is
possible, even
likely, that this entire transaction would collapse.

And, if we were to grant these extensive conditions, there would inevitably
be shippers
and communities who compete with the shippers and communities to whom we give
new
competitive service who could claim that they too are competitively
disadvantaged. As a
practical matter, the line must be drawn somewhere. Under the statute, the
railroads are given
the initiative in making merger proposals, which we are to approve if they are
in the public
interest, as is this one.

Requests To Restore Competition That Existed Prior To
Conrail. A number of
parties have urged us to take this opportunity to restore something approaching
the level of
competition that existed in the Northeast prior to the formation of Conrail.
These parties
correctly point out that during this earlier period many shippers in the
Northeast had available
several rail carriers to provide service. The crucial point that these parties
overlook is that none
of these carriers providing alternative service proved to be economically
sustainable. In large
part, this was due to ever-increasing competition from motor carriers.
Although there were many
competing visions of how rail service might best be restructured in the
Northeast, Congress, in
adopting the Final System Plan, concluded that only one major railroad would be
feasible in
certain areas. For the most part, Conrail's structure before the merger, not
the structure of its
predecessors, generally provides the appropriate baseline for determining
whether relief is
warranted.(110) This transaction actually
restores two-carrier competition in some of the areas
where Congress provided for only one railroad when it adopted the Final System
Plan. While we
are not averse to facilitating new competition, where possible, neither this
transaction nor the
Board should be charged with restoring the rail map as it existed prior to the
bankruptcy of
numerous railroads in the Northeast and the formation of Conrail.

Single-Line To Joint-Line Issues. Although about six
times as many shipments will go
from joint-line service to single-line as the reverse,(111) applicants concede that there are some
shippers whose single-line service will be replaced by somewhat less efficient
joint-line service
as a result of the merger. As applicants note: "The creation of a limited
number of joint-line
movements is an unavoidable by-product of this transaction." We agree with
applicants'
assessment that shippers would be modestly harmed because they will receive
somewhat less
efficient joint-line service after the transaction, but that more shippers will
benefit through newly
available single-line service.(112) The net
result is improved service in the public interest.

In most cases, it is difficult to devise a remedy for the relatively few
shippers that have
lost single-line service without fundamentally restructuring the transaction
that applicants have
proposed. We believe that the appropriate remedy for this limited harm is the
creative solution
that has been agreed to already by applicants and NITL in paragraph III(E) of
the NITL
agreement, "Interline Service." That provision, which, as explained above, we
have extended to
shippers served by a Class III railroad, assures the continuation of service at
existing rates for 3
years for Conrail shippers that previously had single-line service but will
have joint-line service
after the transaction. It would unduly interfere with applicants' proposed
operations and be a
substantial overreach, however, for us to give either NS or CSX trackage rights
to permit these
shippers direct access to two carriers so that one of them could serve those
particular shippers in
single-line service.(113) Nevertheless, as
part of our overall monitoring of the transaction, we will
focus on ensuring that shippers affected by a loss of single-line service
continue to receive
adequate service.

Shipper Contracts. Applicants have agreed that either NS
or CSX will continue to
perform service under all of Conrail's existing rail transportation contracts
with shippers.
Additionally, applicants have asked us to approve a provision (section 2.2 of
their Transaction
Agreement) that would invoke our exemption authority under section 11321 to
override any anti-assignment or other similar clauses contained in those
contracts that would impede their plan for
carrying out this transaction.

1. Override Issues. Applicants have argued that we need to
override these clauses or else
neither NS nor CSX will be able to plan adequately their operations immediately
after the
merger, and that this will prove particularly troublesome in the Nor
th Jersey SAA and other
places with heavy movements of traffic. Eastman Kodak Company (Kodak), the
U.S. Clay
Producers Traffic Association, Inc. (CPTA), and APL Limited (APL)(114) have argued that, if a
shipper has bargained for a nonassignable contract, then that bargain should
not be undercut
absent some very compelling reason. Although we generally agree with this
argument, we are
persuaded that there is a compelling reason for a limited 6 month override of
these provisions.
We believe that this relief is necessary to permit applicants to carry out
their transaction in an
orderly manner. We are fully aware that the first months following a major
restructuring such as
this one can involve operational problems, as the merging companies need to
reorganize the
service that they provide. We believe that the override provision is necessary
to permit both NS
and CSX to plan the services that they will provide at the outset, in the
months immediately
following Day One, the date when CSX and NS begin to integrate Conrail's assets
into their
systems. Services in the SAAs, those that are most affected by this override
proposal, are
particularly complicated, and will require substantial planning.

Applicants, however, have not demonstrated that a permanent override would
be
necessary to carry out this transaction. Accordingly, we will limit our
override of antiassignment
and other similar clauses to a 6-month period following Day One.(115) This will permit each of
these carriers to compete for this traffic, where possible, after an initial
adjustment period. After
180 days, if the contract has not expired already, the shipper may elect to
continue the contract
until its expiration under the same terms with the same carrier, or, without
making any showing
with regard to service, it may exercise any termination or renegotiation rights
contained in the
contract, provided the shipper has given 30 days' written notice to the carrier
serving it.

In the period leading up to Day One, and in the 6 months thereafter,
applicants should be
able to obtain a much more precise reading of what portion of this traffic they
will be handling,
and plan accordingly, in the same way that they will determine what portion
they will handle of
other traffic that is not under contract. They will also have substantial time
to negotiate new
contracts or contract extensions with shippers. Moreover, in Decision No. 87,
served June 11,
1998, we granted applicants' request for immediate access by CSX and NS to
Conrail's shipper
contracts to permit them immediately to begin the process of determining which
carrier will
serve each contract shipper in the SAAs or otherwise.

We disagree with those parties that have argued that such an override is
beyond our
authority to grant. Although DOT states that it "does not question the Board's
statutory authority
to override previously contracted-for non-assignment provisions," DOT-6 at 41,
APL questions
our authority to override any provisions of a shipper contract. APL points out
that 49 U.S.C.
10709(c)(1) provides that:

A contract that is authorized by this section, and transportation under such
contract, shall not be subject to this part, and may not be subsequently
challenged
before the Board or in any court on the grounds that such contract violates a
provision of this part.

APL argues that, because section 11321, the provision that permits us to
override other laws as
necessary to carry out a transaction that we approve, is a provision of this
part (Act), then we
cannot use section 11321 to override any provision of a section 10709 shipper
contract.

APL has read this language out of context. When read in context, section
10709 was
clearly intended to subject shipper contracts to the same commercial rules that
govern other
contracts under applicable state and federal law. The statute makes plain that
any disputes
concerning such contracts are to be resolved by a court, and not by us. The
statute also makes
clear that when transportation is provided under contract, provisions of the
Act relating to such
issues as tariffs, maximum rates, and discrimination, and other issues, are not
applicable. There
is no indication, however, that section 10709 was intended to limit the agency
from preempting
contracts as necessary to carry out a merger or other transaction that we
approve under section
11323-24.

2. Requests To Invalidate SAA Contracts Or Give Shippers A
Choice. Many shippers
who will now have service by both CSX and NS where they previously had service
by Conrail
alone are eager to take advantage of this new competition as soon as possible.
These shippers
have asked us to permit shippers an option to invalidate all Conrail contracts
in the shared assets
areas, regardless of whether or not they are assignable. We see no reason to
invalidate contracts
that were freely negotiated between Conrail and its shippers.

CSX and NS have proposed a division of Conrail contracts on a 42% to 58%
basis, as
they have divided other assets.(116) In
contrast, CMA has urged that all former Conrail contract
shippers in the shared assets areas be given the option of choosing to be
served either by NS or
CSX under the original terms of their contracts. CMA argues that contract
shippers in the shared
assets areas would be competitively disadvantaged vis-a-vis non-contract
shippers, who would be
able to take advantage of two carrier competition immediately. DOT has
suggested that we
should either decline to override antiassignment clauses or give shippers the
choice of whether
CSX or NS serves them.

Even if CMA's proposal were adopted, however, contract shippers would have
to pick
one railroad or the other, and the rate and other terms of the existing
contract would still be
binding. We see no reason to disrupt applicants' proposed allocation of
Conrail contracts, which
seems reasonable and fair overall, in order to address the transitional problem
of who will carry
out the Conrail contracts. Moreover, we note that this is likely to be a short
term problem
because our experience has been that most transportation contracts (other than
coal supply
contracts) tend to be short term. As DOT points out, "since the contracts are
of such short
duration, there is both an incentive to the serving railroad to earn the
business of the shippers,
and a near term opportunity for shippers freely to negotiate with other
railroads in any event."
DOT-6 at 42.

3. Antitrust Immunity. DOT has pointed out that, absent the
umbrella of our antitrust
immunity in approving the transaction, applicants' proposed division of
contracts could present
an arguable antitrust problem. Thus, we will specifically grant immunity for
this division of
Conrail contracts between CSX and NS, which we find to be necessary to carry
out the
transaction.

4. NITL Agreement. Finally, we note that the NITL agreement does
provide an effective
remedy for shippers in the shared assets areas who are dissatisfied with
service rendered by CSX
or NS under former Conrail contracts that have been delegated to them. The
agreement provides
a procedure under which those shippers could complain to an arbitration panel
about their
existing service, and obtain the right to use the other carrier in some
circumstances. As we have
previously noted, however, shippers seeking to terminate contracts with
antiassignment or other
similar clauses will not have to make any showing about inadequate service, and
will be able
freely to exercise whatever termination rights those contracts may contain
after 180 days from
Day One, provided they have given the railroad 30 days' notice.

5. Summary. Thus, with regard to contracts, the Board provides
as follows. Prior to Day
One, Conrail contracts will continue to be performed by Conrail. During the
period following
Day One, CSX and NS will divide up Conrail contracts as discussed previously,
and operations
under those contracts will proceed according to the terms of the contracts. If
any of the contracts
have antiassignment or other similar clauses, for a period of 180 days those
clauses are
overridden and these contracts are allocated between CSX and NS as previously
discussed, and
oeprations under these contracts will proceed according to the terms of the
contracts.

Shortline Issues. The American Short Line Railroad
Association (ASLRA) and
Regional Railroads of America (RRA) claim that, because the transaction will
result in
significant changes in the relationship between shortlines and Class I carriers
in the East, we
should impose special conditions to protect the interests of the smaller
carriers. In our merger
decisions, including this one, we have given special consideration to shortline
interests,
generally providing protections similar to those afforded shippers. For
example, if a merger
would cause a shortline to lose one of its two Class I connections, it has been
our practice to
impose conditions, where feasible, to preserve a second connection. Similarly,
if a shortline
carrier has a build-out option to reach a second Class I carrier, we have
attempted to preserve that
option as well. We have also prevented contractual blocking provisions -- that
make it more
costly for shortlines to route over Class I carriers other than those from
which they have been
spun off -- from having greater force as the result of a merger.

We are keenly aware that the shortlines are an important part of the
national rail
transportation system. They provide a valuable service in gathering and
distributing traffic that
generally flows over the lines of the Class I carriers, and they are usually
able to provide this
type of service at a lower cost than the larger carriers can achieve. Because
they provide
valuable and efficient services, shortline carriers have generally been able to
reach privately
negotiated agreements with the larger carriers. There is no indication that
this mutually
beneficial process will suddenly terminate or be jeopardized because of this
transaction.
Nevertheless, where conditions are warranted to protect the interests of
particular shortlines, or
shortlines in general, from the adverse impacts of this transaction, we will
impose them as
appropriate.

1. Freezing Agreements, Rates And Routes. ASLRA and RRA ask that
we require NS
and CSX to adopt all of the existing agreements between Conrail and the various
shortlines and
apply them until there is mutual agreement that any change is required.
Applicants have agreed
to adopt Conrail's existing agreements for their duration, which we believe
should satisfy the
shortlines' concerns in this regard.(117)
But, to the extent the shortlines would go beyond that, and
have us require that existing gateways and rate relationships are maintained in
perpetuity unless
there is mutual agreement to change them, such relief would give the shortlines
a veto power
over any change in the existing agreements and relationships, making it
unnecessarily
cumbersome for these parties to revise them. Freezing agreements, rates, and
routes would
prevent efficiency enhancing changes that benefit shippers. The ICC once
pursued a policy of
freezing routings, gateways, and rate relationships, but this policy was not in
the public interest,
and we will not reinstitute it here. SeeDT&I.

2. Blocking Provisions. ASLRA, RRA, and a number of shortline
carriers, including the
Reading Blue Mountain and Northern Railroad (RBMN), and at least one shipper,
Union Camp
Corporation, have raised issues about "blocking" provisions. These provisions
are features of
many contracts of sale or lease of rail lines of Class I carriers to shortline
carriers that are
imposed by sellers to ensure that the traffic originated by shortline carriers
on these segments
that used to be owned by Class I carriers continues to flow over the lines of
the seller to the
maximum extent possible. SeeBNSF, slip op. at 17, 94.

It is clear that Class I carriers have been willing to sell lines at lower
prices with these
conditions attached. We do not believe, however, that it would be appropriate
for us to require a
wholesale elimination of these freely negotiated contractual terms as part of
this proceeding.(118)
Nevertheless, we certainly will not permit a transaction such as this to unduly
increase the effects
of these blocking provisions. For example, RBMN is concerned that the blocking
provision in
its contract will make it prohibitively expensive for it to connect with
another carrier to reach all
points that could be served by NS, which is taking over the Conrail lines that
now connect with
RBMN. We will grant the relief RBMN seeks by restricting the blocking
provision to
destinations on NS that were formerly Conrail destinations. That is, as the
ICC did in BNSF, slip
op. at 94, with regard to Grainbelt Corporation, we will preclude existing
blocking provisions
from being interpreted in such a way that the transaction would expand their
reach.

3. Oversight. ASLRA and RRA ask that we perform 5 years of
continuing oversight
concerning shortline issues they have raised here. We will adopt that
proposal, and invite these
shortline associations and their members to participate in the oversight that
we will be
conducting.

INDIVIDUAL CONDITIONS SOUGHT

Criteria For Imposing Conditions. The various conditions
requested by parties involve
the exercise of our conditioning power under section 11324(c), which gives us
broad authority to
impose conditions governing railroad consolidations. Because conditions
generally tend to
reduce the benefits of a consolidation, they will be imposed only where certain
criteria are met.
49 CFR 1180.1(d); Grainbelt Corporation and Farmrail Corporation v. STB,
109 F.3d 794, 796
(D.C. Cir. 1997). Conditions will generally not be imposed unless the merger
produces effects
harmful to the public interest that a condition will ameliorate or eliminate.
The principal harms
for which conditions are appropriate are a significant loss of competition or
the loss by another
rail carrier of the ability to provide essential services. Essential services
are those for which there
is no adequate transportation alternative.(119)

A condition must be operationally feasible, and produce net public
benefits. We are
disinclined to impose conditions that would broadly restructure the competitive
balance among
railroads with unpredictable effects. See, e.g., SF/SP, 2
I.C.C.2d at 827, 3 I.C.C.2d at 928; and
UP/MKT, 4 I.C.C.2d at 437. A condition must address an effect of the
transaction, and will
generally not be imposed "to ameliorate longstanding problems which were not
created by the
merger."(120) Finally, a condition should
also be tailored to remedy adverse effects of a
transaction, and should not be designed simply to put its proponent in a better
position than it
occupied before the consolidation.(121)

Because there are so many parties requesting conditions, we will not
discuss each one
here. Many of the conditions requested have been denied because they are
addressed to a
preexisting problem. Other conditions are addressed to allegations concerning
such issues as
vertical effects of the transaction, the acquisition premium, increased rail
options of shippers'
competitors, and the shift of some traffic from single-line to joint-line
service. These broad
issues have been discussed above. All requests for conditions not specifically
discussed and
approved in this decision should be considered denied. We note also, however,
that we have
taken into account many of the concerns expressed by parties that are not
specifically being
discussed in this decision in imposing other broad conditions, including our
expanded oversight
condition. Moreover, we emphasize that many of the settlement arrangements
applicants have
entered into with some of the parties serve to address concerns expressed by
other parties as well.

NORTHEAST

East Of The Hudson. NYDOT and the New York City Economic
Development
Corporation (NYCEDC), and Congressman Nadler and 23 of his Congressional
colleagues
(Nadler Delegation), protest that, while shippers in the North Jersey SAA west
of the Hudson
will gain direct rail competition between CSX and NS after the transaction,
shippers east of the
Hudson will continue to have access to only one Class I carrier, with CSX
replacing Conrail.
Protestants would enlarge the North Jersey SAA to include New York City and
Long Island, or
would introduce another carrier to operate over trackage rights between
Selkirk, NY (near
Albany), and Fresh Pond, NY (in Queens), on the Conrail line being allocated to
CSX.

The Nadler Delegation asks for a condition requiring a joint facility east
of the Hudson
River that would be connected to New Jersey and Long Island via existing
passenger railroad
tunnels through midtown Manhattan and over the New York Cross Harbor Railroad's
(NYCH)(122)
cross-harbor float operation. Under their plan, Conrail Shared Asset Operator
(CSAO) would be
required to acquire and operate the cross-harbor float, and a core system of
rail lines and
terminals east of the Hudson, connecting at Fresh Pond. The Nadler Delegation
also points out
that this general area experiences severe motor vehicle traffic congestion and
related air
pollution. They allege that the transaction will aggravate these problems, but
that better cross-harbor transportation will improve them. Included in the
joint facility they propose would be the
Bay Ridge Line, operated by the New York and Atlantic Railway (NYAR) under
concession
from the LIRR. NYAR strongly opposes the Nadler Delegation's proposal to
conscript its
facilities for this use by CSAO, and it also contends that the Bay Ridge Line
lacks the physical
capacity to carry additional freight traffic.

The New York parties argue that it is unfair that the transaction benefits
shippers west of
the Hudson with new two-carrier service, but does not confer similar advantages
on shippers east
of the Hudson. Even though, as explained below, we are inclined to make an
exception to our
general policy of not attempting to significantly enhance parties' pre-merger
competitive
alternatives, here, not all of the relief that protestants seek is feasible or
necessary.

The City. There are some serious operational problems with
introduction of any
additional rail service in the New York metropolitan area east of the Hudson.
One of these
problems is the low density of rail freight traffic. As applicants have
pointed out, only about 5%
of the rail freight revenues in the Greater New York City area are derived from
shipments
originating at or destined to points east of the Hudson. Over 97% of New York
metropolitan
area freight traffic east of the Hudson moves in or out of the city by truck.
Thus, Conrail only
provides Albany-to-New York City freight service through a single round-trip
train 5 days a
week.(123) Any additional operations would
require adequate density to provide effective and
efficient service, and there is no indication that such traffic will be
forthcoming.(124)

An even more difficult problem is the extremely limited amount of excess
rail
infrastructure, and the severe physical limitations that the densely built city
imposes on any
efforts to increase that capacity. Many of the lines over which these parties
would impose
trackage rights are heavily traveled passenger lines. Some of the segments
operated by Metro
North carry as many as 332 passenger trains a day. CSX/NS-176, R.V.S. Orrison
at 123. In
addition, applicants assert that existing freight yards lack the capacity to
accommodate additional
carriers, and it is difficult to find commercial space to accommodate yards for
a second Class I
carrier coming into New York City. Id.

Moreover, it appears that existing passenger railroad tunnels through
midtown Manhattan
may have difficulty accommodating currently available equipment. Applicants
claim that neither
RoadRailers nor standard boxcars could move through those tunnels (CSX/NS-176,
R.V.S.
Carey at 5; R.V.S. Orrison at 125), although protestants dispute this claim
with regard to
RoadRailers. Applicants also note that, because standard intermodal equipment
requires
clearances ranging up to 20'6" for high cube double stack containers,
intermodal trains could not
clear the tunnel either.

Even if special equipment were obtained, operations through the tunnels
might be
difficult given the level of passenger traffic present over this route.
Scheduling additional freight
traffic could increase substantially the risk of delay and the possibility of
disrupting passenger
service. CSX/NS-176, R.V.S. Orrison at 126. Operating these trains at night
might not be a
solution if it interferes with Amtrak's maintenance operations on the rights of
way through Penn
Station. Given the limited capacities of its route to and through Penn
Station, Amtrak must
reconcile maximum safe passenger use with a maintenance program ensuring
adequate repair.(125)
Given these problems, it is not surprising that Conrail has never negotiated
any operating
protocols with Amtrak permitting use of these tunnels. CSX/NS-176, R.V.S.
Carey at 6.

Whether CSX or NS will be able to negotiate such agreements in the future
is uncertain.
We believe it would be unwise for us to mandate such use given the operational
and safety
problems it could entail. We will, however, impose a condition requiring CSX
to cooperate with
the New York interests in studying the feasibility of upgrading cross harbor
float and tunnel
facilities that may alleviate traffic congestion and consequent air pollution
in New York City.(126)
We will not require CSX to purchase, rehabilitate or operate these facilities.
We assume that, if
these facilities would improve the efficiency of its operations, CSX will use
them, if they are
available, for through movements over its own lines or joint movements with
NS. We will
specifically oversee the impact of this condition under our 5-year monitoring
program.

In addition to being very difficult to execute, and likely being outside of
our authority to
grant vis-a-vis use of the rail property of nonapplicant railroads NYCH and
NYAR, additional
ameliorative conditions to create additional or enhanced direct rail
connections with the North
Jersey SAA are unnecessary because the transaction should fundamentally
improve, rather than
harm, competition in the New York metropolitan area. There is now only one
Class I rail carrier
east of the Hudson, Conrail. Following the transaction, CSX will take its
place. The
introduction of two strong competitive rail carriers, NS and CSX, in the North
Jersey SAA, will
make rail competition in the city stronger. The nearby presence of NS will
force CSX to pay
close attention to the shippers in the city, to ensure that they do not resort
to drayage across the
river where they will have an NS option. Many of these shippers now dray their
shipments to
Northern New Jersey for subsequent rail transport. Although Conrail has been
indifferent to the
use of drayage across the Hudson because it has no rail competition on either
side, CSX points
out that "CSX, in its own interests, will seek to minimize any such drayage."
See CSX/NS-176
at 14. This should moderate somewhat the increase in cross-river drayage that
we expect will be
generated by the new, competitive intermodal staging areas in the North Jersey
SAA, at the same
time that it increases competition in the region.

The Nadler Delegation is concerned about the impacts on air quality of
additional
drayage across the George Washington Bridge. They have suggested that over
1,000 truck
movements a day will shift from the relatively uncongested Tappanzee Bridge to
the George
Washington Bridge to take advantage of the new intermodal staging areas in the
North Jersey
SAA. We believe, however, that the number should be no higher than 253.
See Final EIS,
Volume 6B, Appendix H, at H-15. These additional trucks would amount to a
negligible 1%
increase in the daily truck traffic on the George Washington Bridge.(127)

Nevertheless, because of the potential adverse environmental effects that
would result
from an unexpectedly large merger-related increase in truck traffic through the
city and over the
George Washington Bridge, we will impose a condition requiring applicants
immediately to
begin monitoring origins, destinations, and routings for motor carrier traffic
at their intermodal
terminals in Northern New Jersey and in Massachusetts. The purpose of the
study is to permit us
to determine the accuracy of our assessment that the transaction will not
result in substantially
increased truck traffic over the George Washington Bridge. Applicants should
report their
results on a quarterly basis, and this matter will be specifically included in
the 5-year oversight
condition that we are imposing.

Beyond The City. The settlement agreements reached with Canadian
National Railway
Company (CN) and Canadian Pacific Railway (CP)(128) will increase rail transport options for
shippers. These agreements -- giving CN and CP the opportunity to offer
transportation services
to shippers in New York City and Long Island for general merchandise traffic
via haulage rights
-- have been specifically designed to attract truck-competitive freight
business off the roads and
on to rail. These agreements will now permit many area shippers to solicit
independent
competitive bids from at least two railroads. This is new competition. As we
have noted, the
significant traffic problems east of the Hudson predate this transaction.
Overall, the transaction,
with the CN and CP/D&H agreements that are designed to capture traffic
previously handled by
motor carriers, should ameliorate somewhat this longstanding problem.

Nonetheless, NYDOT and NYCEDC have cogently explained why the separate and
confidential settlement agreements reached by CSX with CP/D&H and CN are,
as presently
configured, not sufficient to satisfy the needs of east-of-the-Hudson
shippers. See NYS-24,
confidential version. One deficiency in the CSX-CP haulage agreement may be
the revenue
factor CSX is to receive for this service, which the New York parties assert is
considerably above
their calculations of Conrail's URCS variable cost or fully allocated cost for
existing movements
along the Hudson Line.(129) More importantly,
numerous other restrictions significantly limit the
movements to which this privately negotiated haulage agreement would apply.

We have carefully balanced the needs of the competing parties here, and
strongly believe
that we must forcefully use this opportunity to restore a modicum of the
competition that was
lost in the financial crisis that led to the formation of Conrail. It appears
that there will soon be
sufficient capacity on the Hudson Line for safe service from a second freight
operator.(130)

Therefore, we will impose a condition requiring CSX to negotiate an
agreement with CP
to permit either haulage rights, not restricted as to commodity or geographic
scope, or similarly
unrestricted trackage rights, over the east-of-the-Hudson line from Fresh Pond
to Selkirk (near
Albany), under terms agreeable to the parties, taking into account the
investment that continues
to be required for the line. If these parties have not reached agreement
within 60 days of the
effective date of this decision, we will initiate a proceeding to determine
just how the needs of
the New York parties are to be addressed. Moreover, CSX should offer to the
City of New York
to establish a committee for the development of rail traffic to and from the
City, with particular
emphasis on the Hudson Line.

Similarly, as a step toward allowing more rail competition into and out of
the city, CSX
should discuss with Providence & Worcester Railroad Company (P&W) the
possibility of
expanded P&W service over trackage or haulage rights from Fresh Pond to New
Haven, CT,
focusing on operational and ownership impediments related to additional freight
service over the
line.(131) We will continue to follow the
progress of these negotiations as part of the oversight
process.

New York Cross Harbor Railroad (NYCH). NYCH has also submitted
comments, asking
for the imposition of certain conditions relating to traffic between Long
Island and points in
Southern New England and adjacent New York, on the one hand, and points in the
Mid-Atlantic
States and the South and Southwest, on the other. NYCH claims this traffic
should travel via
what NYCH describes as its "Greenville Gateway." NYCH-3 at 8. It appears
that NYCH's
requested conditions relate to allegations it is now pursuing in a pending
lawsuit against Conrail
wherein NYCH alleges that Conrail has failed to honor shipper directions to
route traffic moving
between Long Island-Southern New England and the Southeastern and Southwestern
regions of
the country over its supposedly efficient float operation connecting Brooklyn
and North Jersey
waterfronts that were discussed in the preceding section.(132)

The issues in this court case are irrelevant to future operations of
Conrail lines by CSX
and NS. Insofar as the transaction is concerned, NYCH will now have access to
both NS and
CSX via the Greenville Yard, and NYCH is not adversely affected by the
transaction. Even if
NYCH had difficulties in the past in its dealing with Conrail, there has been
no showing that
CSX or NS would not use NYCH's Greenville Gateway if it represented the most
efficient and
most economical routing, which has not been shown. Therefore, we are denying
NYCH's
request for conditions.

Buffalo/Niagara Falls. The primary focus of the parties
representing the
Buffalo/Niagara Falls area (Erie Niagara Chautauqua Rail Steering Committee
(ENRSC),(133)
NYDOT, General Mills,(134) and others) is to
obtain SAA status for Buffalo, which they contend is
necessary for area shippers to remain competitive with shippers in the Detroit
SAA and
elsewhere that have gained service of an additional carrier through this
transaction. They also
argue that we should take this opportunity to restore the level of rail
competition that preceded
the formation of Conrail.(135) Congressman
Jack Quinn and Congressman John J. LaFalce pointed
out at oral argument that, before the adoption of the Final System Plan, the
United States
Railway Association (USRA) proposed two-railroad service for Buffalo, and they
urged the
Board to take this opportunity to create that competition now. They also noted
that Conrail's
reciprocal switching rates in Buffalo are some of the highest in the nation.

The transaction plan does call for two carriers to serve the Buffalo area.
CSX will
acquire the former New York Central line, while NS will acquire the former Erie
Lackawanna
line reaching Buffalo from the east, as well as the former Penn Central line
reaching Buffalo
from the south, and overhead service over what remains of the Erie Lackawanna
line reaching
Buffalo from the north that connects with Canadian carriers at Niagara Falls.
Although it is true
that this arrangement will not create direct two-railroad service for all
shippers in the Buffalo
area, it will greatly improve local competition. This is so because local
shippers served directly
by either CSX or NS will now be able to take advantage of the nearby presence
of the other
carrier through drayage, and in some cases through build-outs.(136) More importantly, new
shippers contemplating locating in the Buffalo area or expanding operations
there may have the
option of locating on lines of either of these two major carriers, and can lock
in the benefits of
this competition through a long-term contract.

In addition, the NITL agreement, with its provisions for reduced reciprocal
switching
charges, will help many shippers who have complained about the very high
reciprocal switching
charges formerly assessed by Conrail. Many Buffalo shippers -- applicants
estimate 50%, while
some area protestants estimate 20-30% -- will have access to both NS and CSX
through
reciprocal switching. It is clear that the conditions we are imposing will
preserve existing
switching agreements for 10 years while limiting switching rates to $250 per
car for 5 years.
This is a sharp drop from the prevailing level of $390-450 for switching fees
about which
protestants have complained. Moreover, we will require CSX to carry through on
its agreements
with CN and CP, providing for lower switching fees in the Buffalo area.

Against these competitive and other benefits, protestants raise limited
specific allegations
of loss of rail competition by these parties relating to (1) Conrail's
switching cancellations at
Buffalo in November 1996, (2) Conrail's cancellation of switching at Niagara
Falls in April
1996, and (3) reduction of competition at the Buffalo waterfront.(137) As detailed below, we find
that the latter two of these allegations have merit, and we will impose
conditions addressing
these situations.

1. Protestants allege that Conrail's cancellation of switching for 89
shippers in Buffalo in
November 1996, a month after Conrail's and CSX's initial agreement to merge,
was in
anticipation of this transaction, which eventually superseded the Conrail/CSX
agreement.
ENRSC and others would have the definition of 2-to-1 points receiving access to
a second carrier
through trackage rights conditions extended to cover those points that lost
reciprocal switching
through these cancellations.

These allegations, if true, would be cause for concern. The record,
however, does not
support the inference that the Buffalo switching cancellations were taken in
anticipation of this
transaction, but indicates that they were part of a routine tariff updating
process for shippers that
were no longer present or no longer desiring rail service. The dispositive
fact here is that the
cancellation process itself allows for immediate reinstatement of reciprocal
switching for any
shipper coming forward to request it. Opponents could have settled this issue
clearly and
conclusively had they simply produced specific shippers to testify to having
been wrongly
identified as missing or inactive; no shipper has done so. We are left to
conclude that there are
no such shippers.

2. A more serious charge of switching cancellations leading to competitive
harm from
this transaction involves the April 1996 cancellation by Conrail of switching
for CSX
movements into the Niagara Falls area for traffic using one of the two nearby
rail bridges
connecting the United States with Canada. In 1995, CSX changed the way it
served this traffic,
from using trackage rights in Canada over CN and a Conrail switch at Suspension
Bridge to and
from shippers in Niagara Falls, to a haulage agreement in which CN carried this
CSX traffic
across International Bridge at Fort Erie, through Buffalo and into Conrail's
Frontier Yard. Under
this arrangement, Conrail took the CSX traffic to and from the yard, and
Conrail received its
compensation in the form of a division of a line haul rate, rather than a
switching charge.
Applicants concede that more recent arrangements CSX has made with the Canadian
roads may
cause this traffic to move via Suspension Bridge or Frontier Yard, but state
that, in either case,
Conrail will pick up the traffic and take it to Niagara Falls as part of the
line-haul movement.(138)

We find these arrangements whereby Conrail receives compensation for the
short pick-up
and delivery component of International or Suspension Bridge movements into and
out of the
Niagara Falls area via a division of a line haul rate to be no different in
substance from its prior
compensation arrangement, when its compensation was termed a switching charge.
If
Suspension Bridge were to have become the point of entry again, as applicants
suggest, the
Conrail movements under the joint rate with CSX would have been identical to
the earlier
Conrail movements under the switch.

In their settlement with NITL, CSX and NS have agreed to mitigate the
market power
they will inherit from Conrail at exclusively served points where Conrail
performs switching
services. We find that the terms of that agreement, as they apply to
reciprocal switching, should
be applied to those points in the Niagara Falls area where Conrail recently
replaced its switching
charges with equivalent "line haul" charges, and to those movements to which
the switches and
line-haul rates applied (i.e., movements using International Bridge or
Suspension Bridge). This
directive will bring the compensation under the procompetitive and beneficial
terms of the NITL
agreement.

3. Finally, ENRSC charges that, by taking over Conrail's 5.66-mile Buffalo
waterfront
line (the Buffalo Creek line), CSX would reduce existing competition between
Conrail and its
own trackage rights access over that line. As applicants point out, CSX
transferred one set of
trackage rights to operate over that line to Buffalo and Pittsburgh Railroad
(BPRR) when it sold
all its rail property in Buffalo to that carrier in 1988. Nevertheless, CSX
has retained, but has not
used, a separate set of rights over that Conrail line. As discussed below in
relation to PSI
Energy, in spite of arrangements that may have been made with Conrail or BPRR,
trackage rights
may not be canceled unless we grant authority for their discontinuance.
Thompson v. Texas
Mexican Ry., 328 U.S. 134 (1946). To ensure that shippers on the Buffalo
Creek line would not
inadvertently lose one of their two Class I rail connections as a result of the
transaction, we will
require that the CSX trackage rights over Conrail on the Buffalo Creek line be
transferred to
NS.(139)

Other Remedies. Following a request made by Chairman Morgan at
the close of oral
argument, CSX proffered a number of additional conditions and representations
that it agreed
could be imposed to accommodate concerns raised by parties in the Buffalo
area. Even though
we do not think that these proferred conditions and representations in and of
themselves would
be adequate to address the concerns of the Buffalo parties, they are clearly
beneficial and
complement the procompetitive conditions we are imposing for Buffalo.

1. As discussed previously, we will require CSX to adhere to the
agreements it has
separately reached with CN and CP/D&H providing both lower switching fees
in the Greater
Buffalo area and increased access to these carriers for cross-border,
truck-competitive traffic.

2. We will also require CSX to meet with regional and local authorities in
the Buffalo
area to establish a committee to promote the growth of rail traffic to and from
the Greater Buffalo
area. The committee will meet periodically to address the region's industrial
and economic
development goals and opportunities for diversion of truck traffic to rail, as
consistent with safe,
efficient, and profitable rail service.

3. We will hold CSX to all of its representations related to the Buffalo
area, most notably
those regarding its plans for investment in new connections and upgraded
facilities in the Buffalo
area, including: (1) upgrading Conrail's existing computer technology and
fueling facilities at
Buffalo; (2) maintaining or increasing current employment levels in the Buffalo
area; (3)
providing overhead trackage rights to NS through Buffalo to Suspension Bridge;
(4) working
with NS and other carriers operating in the Buffalo area to schedule switching
and through
movements within the area's rail network so as to reduce congestion at points
such as CP Draw;
and (5) investing substantial funds in network improvements to reduce shipping
time and
enhance service reliability for rail shippers in the Greater Buffalo area.

Finally, while we believe the competitive and other benefits resulting from
our approval
of this transaction will reduce rates and enhance service for rail shippers in
the Buffalo area, we
have decided to take the additional step of initiating a 3-year rate study to
assess whether our
assessment proves to be correct, or whether Buffalo-area shippers will be
subjected to higher
rates because of this transaction.

Rochester. The Genesee Transportation Council (GTC), and
Rochester Gas & Electric
Company (RG&E) have raised concerns about the impact of the transaction in
the Rochester
area. We concur with applicants that the majority of the issues raised by
these parties relate to
existing conditions, not to any harm caused by the merger. If anything, the
transaction will
enhance rail competition and service in and around Rochester. Enhanced service
will derive
from, for example, the proposed expansion of Frontier Yard, which will improve
classification of
local and regional traffic and reduce transit times. New competition will
derive from the fact that
the Rochester and Southern Railroad, Inc. (R&S) now connects with NS on the
Southern Tier
route in competition with CSX, which inherits the bulk of Conrail's lines and
operations in the
Rochester area.

RG&E's main objection is that its primary coal burning generating
station will retain
service from a single railroad while certain other utility companies are
obtaining two-carrier
service both at their generating plants and at Monongahela coal mines. As
discussed in detail
above, this does not provide a basis for relief. RG&E also calls for a
steep reduction of Conrail's
$390 switching charge as part of the transaction, arguing that the charge
dampens competition.
But the transaction will improve, not worsen, RG&E's situation by limiting
switching fees to
$250 per car. RG&E also calls for us to increase our scrutiny of the
reasonableness of switching
charges in general, but this issue has no nexus to this transaction.

GTC acknowledges applicants' proposal for NS to form an alliance with
R&S to compete
for Rochester traffic, but calls for us to ensure that this alliance is
forged. We fully expect that
NS will have every incentive on its own to form the alliance with R&S.
And, as noted below,
the relief we are granting to Livonia, Avon, and Lakeville Railroad Corporation
should
significantly increase NS' interest in forging an alliance with R&S, and
should further benefit the
Rochester area.

GTC also wants applicants to set up intermodal terminals at specified
locations and to
improve routings between Rochester and the Southeast. Again, these are matters
for negotiation
between Rochester interests and applicants. This proceeding is not the proper
forum for pursuing
these goals.

Delaware Department of Transportation (DEDOT). DEDOT is
primarily interested in
expansion of the South Jersey SAA to include the Port of Wilmington. The port
is currently
served by a single Class I railroad, Conrail, and after the transaction it will
be served solely by
NS. Thus, it appears that the transaction will have no adverse impact on the
port. DEDOT has
also asked that we impose a condition requiring NS to permit passenger service
upon request by
a rail passenger carrier anywhere on its entire system. As discussed in
greater detail in our
section concerning passenger railroads, we believe that these issues are best
left to negotiation
between the freight railroad and the passenger railroad.(140) Moreover, DEDOT has not shown any
particular connection between this transaction and the condition that it
seeks. Finally, DEDOT
has asked that we grant local operating rights for shortline railroads over the
Delmarva
Secondary line. No justification has been presented for this relief.(141)

DEDOT stated at oral argument that it was concerned with high switching
charges at the
Port of Wilmington. The original NITL agreement does not technically apply to
reduce
switching charges between Conrail and carriers other than NS and CSX, but, as
discussed above,
we have extended this component of the agreement to incorporate Class III
railroads. Because
we do not have sufficient information on the situation at the Port of
Wilmington to determine
whether we should impose a remedy and, if so, what that remedy would be, we are
directing
applicants to discuss with the Port any problems concerning switching service
and charges, and
report back to us within 60 days of the service date of this decision. We will
then determine
whether any further action is appropriate concerning this limited issue.

MIDWEST

Chicago Switching District. Several conditions are
sought by various railroads and
others to require a restructuring of operations, beyond that proposed by
applicants, in and
through the Chicago switching area. Wisconsin Central Ltd. (WCL) seeks, in
(Sub-No. 59),(142) a
forced sale by CSX to it of a 7.6-mile portion of The Baltimore & Ohio
Chicago Terminal
Railroad Company's (B&OCT) Altenheim Subdivision, a condition precluding
CSX from
allowing its affiliate B&OCT to charge a separate switching fee for its
services, and neutral
dispatching over Indiana Harbor Belt Railroad Company (IHB). I&M Rail
Link, LLC (I&M)
seeks in (Sub-No. 36) to acquire Conrail's 51% interest in IHB,(143) while Northern Indiana Public
Service Company (NIPS) urges us to prohibit CSX and NS from jointly acquiring
that interest.
NIPS and A.E. Staley Manufacturing Company (Staley) also seek
"nondiscriminatory" dispatch
of rail traffic over IHB, and the Indiana Port Commission (IPC) supports
divestiture of Conrail's
interest in that switching line to a neutral carrier or group of carriers.
Prairie Group, while
supporting the primary transaction, has expressed concern about its effect on
IHB, and in
particular upon IHB's local on-line shippers. Applicants oppose all of these
requests as
competitively unjustified.(144)

As a preliminary matter, WCL's request to preclude separate charges by
B&OCT has no
nexus to this transaction. This relief appears to have been sought merely to
permit WCL to
achieve its longstanding goal of avoiding B&OCT's switching charges for
traffic routed WCL-B&OCT-CSX, a matter wholly unrelated to the transaction
before us.(145) Similarly, WCL's bid to
acquire a 7.6-mile portion of B&OCT's Altenheim Subdivision, purportedly to
resolve possible
service quality issues, has not been justified either. For a number of years,
WCL has been
interested in acquiring this property, but it has evidently been unwilling to
pay the asking price.
It has not provided any competitive or other justification for that
extraordinary relief here.

The basic question we must consider when evaluating these proposed
conditions is
whether the transaction would cause any significant competitive harm or unduly
disrupt essential
service in this area; we conclude that it would not. Responsive applicants and
others maintain
that the transaction would limit independent routing options in and around
Chicago, increase the
leverage of CSX and NS to control this traffic, and diminish the ability of
other carriers to
compete for traffic in the area. A review of the situation, however, reveals
that the transaction
will not result in any significant change in the concentration of ownership of
the relevant
switching carriers, and thus will not impair rail competition in the region.

There are now three switching carriers in the Chicago Terminal area:
B&OCT, which is
entirely owned by CSX; IHB, which is owned 51% by Conrail and 49% by Soo Line
Railroad
Company (Soo); and The Belt Railway of Chicago (BRC), which is 50% owned by
western
railroads and 50% owned by eastern railroads, with CSX currently holding 25%,
NS 8.33%, and
Conrail 16.67%. After the transaction, B&OCT will continue to be a wholly
owned CSX
subsidiary; NS and CSX will each hold 25% of BRC; and NS and CSX will hold
29.58 and
21.42% interests in IHB, respectively,(146)
with Soo continuing to hold a 49% share.

Responsive applicants rely on the notion that NS and CSX will jointly
control BRC; that
is not the case. NS and CSX will not jointly control, and have not been
authorized to jointly
control, this carrier. Nor do these two eastern carriers have identical
interests. NS and CSX will
each have an incentive to ensure that BRC is operated to facilitate interchange
of its own traffic.
The same was true before the transaction, except that there were three carriers
in the mix. By the
same token, the western carriers still retain a 50% interest here, and they
will ensure that BRC is
managed in a way that keeps their routing options open.

With regard to IHB, NS and CSX would acquire Conrail's interest, while Soo
would
continue to hold a 49% share. Applicants have represented that IHB will
continue to be managed
as a neutral switching carrier, just as it was managed by Conrail before this
transaction. We will
hold applicants to that representation. Responsive applicants have failed to
justify the extreme
divestiture remedies that they have sought. They have failed to show that the
interchange options
of any carriers are likely to be disadvantaged by the changed ownership of IHB,
which, with
Conrail's shares controlled by NS and CSX, is less concentrated than
previously. Given
applicants' assurances about the management of IHB, we conclude that no further
relief for this
situation is warranted. Indeed, this type of intrusive solution for problems
we believe are
unlikely to occur raises additional competitive and service concerns that have
not been
adequately addressed by responsive applicants.

As part of our 5-year oversight, we will monitor for problems in the
Chicago Switching
District, and IHB's management as a neutral switching carrier. If problems do
arise after
approval and consummation of the transaction, our monitoring and oversight
conditions should
provide a fully effective mechanism for identifying and resolving them.

In sum, we have no basis for imposing the other conditions relating to the
Chicago area
sought by I&M, IPC, NIPS, Prairie Group and others. The conditions sought,
most of which
would mandate service levels or require specific ownership, care, or use of
switching carrier
assets in the region, are extraordinary and unjustified measures that would
hamper applicants'
efforts to manage their operations efficiently following consummation of this
transaction.(147)

Illinois International Port District (The Port of
Chicago). The Port of Chicago at
Calumet Harbor, Lake Calumet, IL, is the largest port on the Great Lakes. The
Port is divided
into separate eastern and western sides, and trackage to both sides is owned by
NS or related
companies. On the western side, various other trunk and switching carriers
have trackage rights
over NS to serve the Port and its tenants. On the east, NS service is
exclusive. The Port of
Chicago contends that applicants' proposed Operating Plan demonstrates that
service will be
further reduced, and thus that the transaction will aggravate the already poor
competitive and
service situation along the eastern side of Calumet Harbor. It argues that, to
remedy delays and
poor service to customers on the eastern side, to increase intermodal
competition, and to increase
competition with other ports, we should require that NS provide CSX and local
switching
carriers (Chicago, South Shore and South Bend Railroad Company, and Chicago
Rail Link)
rights to serve customers over NS trackage on the east side of Lake Calumet.

We view the problems presented here as pre-existing. As we have explained,
we will not
impose conditions to remedy pre-existing conditions that are unlikely to be
exacerbated by the
transaction. At this point, the Port of Chicago's fears that its rail service
will be further reduced
is speculative. Nevertheless, we will carefully monitor the situation under
the 5-year general
oversight condition being imposed in this proceeding.

Indianapolis. CSX and Conrail are the only Class I
railroads now serving Indianapolis,
and this city contains by far the largest number of shippers that would be
2-to-1 shippers but for
the trackage rights agreed upon between CSX and NS.(148) Under the proposed transaction, CSX
is taking over Conrail's lines, while NS will be given trackage and other
rights permitting it to
serve all of the 2-to-1 shippers. Although The City of Indianapolis originally
had concerns about
this arrangement, it has reached a settlement agreement with applicants that
satisfies those
concerns.

Under that settlement agreement, CSX has agreed to allow greater access to
NS and to
shortlines in the area. NS will have switching rights to any new as well as
existing industries on
the former Indianapolis Union Belt Railroad. The various Indianapolis
shortlines will be allowed
to connect with each other for local traffic moving between points on those
carriers under
switching rates the carriers have negotiated under a 10-year agreement. CSX
has also committed
to permit NS to build its own track in Hawthorne Yard. CSX has agreed to
timely and
nondiscriminatory handling of NS' cars to and from that yard.

Nevertheless, Indiana Southern Railroad, Inc. (ISRR), supported by the
United States
Department of Agriculture (USDA), argues that the transaction, even with the
additional
remedies proposed by applicants, will result in added market power in and around
Indianapolis.(149)

ISRR contends that the transaction places CSX in a more dominant position
than Conrail
is in now and places NS in a weaker position than was CSX. ISRR argues that it
should be given
rights to reach three locations surrounding Indianapolis: Shelbyville, Muncie,
and
Crawfordsville. ISRR claims that, following the transaction, NS, unlike CSX,
will not have its
own tracks, facilities or perhaps even employees on site.(150) It claims that NS will be restricted in
its use of Hawthorne Yard, where it will receive or deliver Indianapolis
traffic for the numerous
2-to-1 shippers in the area. CSX will control dispatching, will provide access
to 2-to-1 shippers
via switching, and will collect switching charges and trackage rights fees.
Some parties,
including USDA, argue that, under those circumstances, NS will not be an
effective competitive
replacement for CSX in this market.

We disagree with this analysis, and believe that NS will be able to replace
the
competition formerly provided by CSX, which now serves shippers in this area
primarily under
similar switching and trackage rights arrangements. Applicants will reduce the
prevailing
Conrail switching charge of $390 to no more than $250 per car for at least 5
years and guarantee
maintenance of reciprocal switching rights for 10 years, which should make NS
more
competitive than was CSX. We have thoroughly examined the 29 cents per
car-mile trackage
rights fee that CSX and NS will charge where they will operate over each
other's lines as a result
of this transaction. As discussed in detail below, that fee is reasonable and
will permit the
trackage rights tenant to replace competition that would otherwise be lost
through this
transaction.(151)

The proposed NS and CSX routings from Indianapolis to the Chicago and St.
Louis
gateways should be just as competitive as the current ones formed by Conrail
and CSX. CSX
will take over Conrail's direct route to St. Louis, but there will now be a new
single-line NS
routing option, less direct than CSX's new route but corresponding to the way
NS and CSX could
connect pre- transaction in joint-line service in competition with Conrail. We
anticipate NS
developing and taking advantage of this new Indianapolis-to-St. Louis route.
As for
Indianapolis-Chicago, CSX's route is more direct; NS picks up Conrail's
existing, less direct
route.

Crawfordsville, in particular, has a number of 2-to-1 shippers, but these
will have very
comparable service to what they had before. Currently, CSX and Conrail
maintain service over a
route through Crawfordsville from Indianapolis to Chicago that is shared
through alternating
trackage rights over each other's lines. The same will be the case between CSX
and NS.
Similarly, we see no substantial change affecting shippers at Muncie.

As to Conrail's role as a "neutral" gateway for shippers it exclusively
serves in the
Indianapolis area, the evidence does not overcome our well-established and
judicially approved
presumption that the merger of a bottleneck carrier with one of its connections
will not unduly
increase rail market power. ISRR has simply presented no convincing evidence
or argument that
CSX will have any more incentive than did Conrail to foreclose the use of
ISRR's lines to
provide efficient interline service.(152)
Moreover, the new connection with NS at milepost 6
resulting from the condition we are imposing in response to IP&L's concerns
should preserve
ISRR's ability to compete for participation in coal movements to IP&L's
Stout and Perry K
plants.

Finally, the $1.5 million ISRR expects to lose of its $9 million in annual
total revenue is
overstated, since that estimate includes traffic already diverted, in 1996, to
INRD at Stout. It
strains credulity that ISRR would give up its ability to compete for this coal
traffic or that it
would sever its only link to Indianapolis. In sum, ISRR has not demonstrated
serious financial
harm to it, much less that this harm would hinder its ability to provide
essential services.

PASSENGER RAILROADS

National Railroad Passenger Corporation(Amtrak). The Northeast Corridor:
Amtrak's main concern has been applicants' request that we override the
agreement between
Amtrak and Conrail so as to permit multiple carriers to operate over important
parts of Amtrak's
Northeast Corridor (NEC). The NEC, a high-speed, high-density line connecting
Boston, MA,
New York City and Washington, D.C., is crucial both to Amtrak's operations and
to rail freight
operations in the East. Conrail conveyed the line to Amtrak in 1976, retaining
a freight service
easement that is governed by the NEC Agreement. Applicants and Amtrak have
recently entered
a comprehensive agreement with regard to this and other issues. We applaud the
parties for
reaching an agreement on this difficult issue without our intervention.

The Oversight Condition: Amtrak has also requested a condition to
guard against any
transaction-related deterioration of Amtrak's on-time passenger operations.
Applicants now
support such a condition as part of their settlement agreement. DOT supports a
more general 5-year oversight condition during which we would monitor
developments regarding the interface
between freight and passenger service. We will incorporate Amtrak's and DOT's
requests as part
of the 5-year oversight that we are imposing.

Regional Passenger Railroads. A number of passenger
railroads and agencies with an
interest in passenger issues have asked for conditions concerning the
relationship between
applicants and passenger railroads in the Eastern United States.(153) We agree with DOT that rail
passenger transportation is an important national resource that contributes
substantially to
reducing air pollution and roadway congestion. We also concur that the
transaction has at least
the potential to affect significantly intercity and commuter rail passenger
service, particularly in
the Northeastern United States. DOT-6 at 22. To ensure the continuation of
reliable rail
passenger service, DOT recommends that we impose a 5-year oversight condition
on the
transaction, with periodic reports to provide sufficient information to monitor
developments. Id.
As noted above, we think DOT's suggestion that we retain jurisdiction to ensure
that reliable
passenger operations are continued is a good one, and we will impose a rail
passenger monitoring
condition, as part of the overall 5-year monitoring condition that we are
adopting for this
transaction.(154)

On review of specific requests for relief, however, it is apparent that
most of the
particular conditions sought by the passenger railroads are not directly
related to effects of the
transaction. Rather, these parties seek material changes to, or extensions of,
existing contracts,
or to compel new contractual commitments or property sales by NS or CSX.(155) We are reluctant
to use our conditioning power to compel resolution of differences between
freight railroads and
passenger agencies with respect to operating, dispatching, and compensation
matters.(156) And
before imposing any such conditions, we would have to study thoroughly the
effect of the
requested conditions on applicants' freight operations, an issue that the
passenger railroads and
agencies appearing here have generally not adequately addressed.

CSX and NS have agreed to step into Conrail's shoes and to honor Conrail's
existing
contracts with passenger railroads and agencies. Similarly, the transaction
will have no effect on
the contracts CSX and NS entered into with the passenger entities before the
transaction. A
number of passenger agencies have requested that we void, extend, or amend in
various ways
their existing contracts with CSX, NS and/or Conrail. These contracts set
forth the rights and
remedies available to the parties with respect to the matters about which they
now complain. As
explained below, no adequate basis has been presented for us to amend these
voluntary private
contracts here.

On the whole, the requested conditions do not arise out of operational or
economic
impacts attributable to the transaction. Rather, they appear to be an effort
to use our approval
process to obtain concessions, revisions or extensions that the passenger
entities have apparently
been unable to work out through the normal process of commercial negotiation.
Applicants
maintain that they have worked in good faith with passenger railroads and
agencies in the past
and that they will continue to do so after the transaction is consummated.

As the record here makes abundantly clear, such contracts frequently
require the freight
and passenger railroads to work out intricate details concerning rail
operations, capital
expenditures, and compensation. The freight railroads need to assure
themselves that they can
share their tracks with passenger traffic without disrupting their freight
operations. This may
require extensive planning and additional capital expenditures, or may not be
possible at all in
some circumstances where existing capacity cannot be sufficiently expanded. By
the same
token, passenger operators need to ensure that they can provide timely and
expeditious service.
We think that, ordinarily, this delicate balance can best be achieved by
negotiation between the
parties. And applicants have represented that they will continue to work with
regional passenger
railroads on issues of mutual importance. Neither a basis nor a need has yet
been presented for
departing from this overall approach, although we will continue to monitor the
situation.

OTHER FREIGHT RAILROADS

Ann Arbor Railroad Company (AA). AA, a Class III railroad
operating a 46-mile line
from Toledo, OH, north to Ann Arbor, MI, claims that the transaction will
divert more than $3
million per year, or 42% of its annual revenues, thereby undermining its
ability to provide
essential services to eight shippers on its system who do not have direct
access to another rail
carrier. AA-8 at 22-23. AA also claims that the transaction, unless
conditioned, will reduce
competition in the Toledo-Chicago corridor. It asserts there are only three
efficient routes, one
over NS and two over Conrail, and that, after the transaction, NS will control
all three of these
routes.

AA seeks a condition giving it approximately 220 miles of trackage rights
over NS from
Toledo to Chicago. It also seeks a condition permitting it to interchange
traffic with CP at Ann
Arbor to provide an additional source of revenue to offset its claimed losses.
Finally, on brief,
AA asks for "DT&I" type rate conditions to preserve efficient routes of
Class III carriers. AA-8
at 26.

AA's argument that the transaction will harm competition on the
Toledo-Chicago corridor
is without merit. Traffic can now move over three feasible routes, two Conrail
routes and an NS
route. After the transaction, NS will take over the most direct Conrail route,
and CSX will also
maintain a route that is only slightly longer. AA objects that the CSX routing
would be more
circuitous and would entail operational difficulties, making it inappropriate
for the time-sensitive
automotive traffic that AA interchanges at Toledo. Assuming AA's evidence to
be correct, only
one of the existing routes, the most direct Conrail route between Toledo and
Chicago via Elkhart,
IN, would be adequate for the time-sensitive automotive traffic with which AA
is most
concerned. As noted, that route will be operated by NS. CSX will provide
service over an
alternative routing that appears to be at least as competitive as the routing
that NS previously
relied upon.(157) Indeed, CSX has committed
itself to investing $200 million to upgrade this line
to compete with NS. We conclude that the transaction will not impair
competition for traffic
moving between Toledo and Chicago, but will preserve or improve options for
these movements.

In any event, the extensive trackage rights remedy sought by AA would
undermine, not
improve, efficient service. Conrail now combines the automotive traffic it
receives from AA
with a large amount of other traffic. This permits it to operate high-volume,
run-through trains
connecting with the major western railroads at Chicago, a service that NS will
continue after the
transaction. AA would be unable to match this volume, and it would have to use
one of the
switching carriers in the Chicago area to complete its movements.

AA's request for authority to interchange with CP at Ann Arbor will also be
denied. CP
performs no operations at or through Ann Arbor. CP has entered a voluntary
haulage rights
agreement with NS, which operates over a Conrail line passing through Ann
Arbor. (NS will
acquire the line through the transaction.) Under the haulage rights agreement,
NS moves CP
trains from Detroit to Chicago. This agreement is for overhead traffic only.
AA has not
demonstrated that permitting its traffic to be picked up by NS for CP at Ann
Arbor is either
necessary or practical. In addition, CP's traffic moving over these haulage
rights is time-sensitive traffic that would be disrupted by the intermediate
interchange required to pick up AA's
traffic at Ann Arbor.

Finally, AA is concerned that CSX and NS may undercut AA's ability to
participate in
through movements serving AA's automotive customers. Ordinarily, we would
expect that, if
AA provides an efficient route and desirable service, which appears to be the
case, connecting
Class I carriers will have a strong economic incentive to use that carrier. AA
has just obtained a
significant contract for some new automotive business with Chrysler
Corporation, which will be
opening a new plant next to AA's Ottawa yard in Toledo. AA concedes that this
contract will
increase its revenues, and offset somewhat the traffic diversion that it
anticipates from the
transaction.

Nevertheless, because of the apparent importance of this contract service
to both Chrysler
and AA, and due to the fact that AA's viability could be threatened by a loss
of this customer, we
will impose a condition to ensure that quality interline service is continued,
and that this contract
is not undermined. Both this condition and the condition we are imposing
allowing AA to
connect with the W&LE at Toledo, as discussed below, should help to improve
AA's financial
prospects. We will also monitor this and other situations involving the
relationship between
shortlines and Class I railroads as part of our oversight process. It would
not be in the public
interest, however, for us to impose the rate equalization conditions that AA
has sought.

Durham Transport, Inc. (Durham). Durham, a Class III
railroad, operates over 12
miles of rail line within the Raritan Center Industrial Park (Raritan Center)
in Edison, NJ, close
by the North Jersey SAA. Durham suggests that the Conrail Shared Asset
Operator (CSAO)
plans to operate out of Metuchen Yard over a track segment, the GSA Lead, that
extends into
Raritan Center. Durham asserts that joint use of the GSA Lead within Raritan
Center is not
addressed in any agreement between Durham and Conrail, and requests that we
condition
approval of the transaction upon the negotiation by applicants and Durham of a
satisfactory
agreement for the joint use of the GSA Lead. Applicants have not responded in
this record to
Durham's request.

Durham has conceded that it has an existing interchange agreement with
Conrail, and that
applicants have informed it that this agreement would be honored by them.(158) Thus, it appears
that there is presently a satisfactory interchange agreement between Conrail
and Durham, and
that the terms of this agreement will continue beyond the transaction. But, it
is not clear to us
whether applicants intend to operate over that segment of the GSA Lead within
Raritan Center
or, if they do, whether a new joint use agreement with Durham would be
required. However,
Durham has not presented any reason for us to think that this transaction will
undermine this
carrier's ability to negotiate a satisfactory agreement for interchange of its
traffic. Remedies are
available under the Act to ensure interchange in the unlikely event that our
intervention becomes
necessary.

Gateway Western Railway and Gateway Eastern Railway
(Gateway). We concur
with Gateway that applicants have not demonstrated that an override of the
assignment
restrictions in Gateway's Cahokia/Willows trackage rights agreements is
necessary under section
11321(a) to enable applicants, in particular CSX, to carry out the
transaction. Gateway insists
that, because it can perform any terminal or interchange switching in the area,
CSX does not
need to assume Conrail's Cahokia/Willows trackage rights. Gateway also
maintains that, in the
absence of an application or petition for exemption with respect to terminal
trackage rights under
section 11102, the unilateral assignment of Conrail's trackage rights to CSX
will not yield
increased efficiency, enhanced safety, or any other transportation benefit.
Applicants, on the
other hand, have not adduced specific evidence or argument to rebut Gateway's
showing that an
override is unnecessary.

Under 49 U.S.C. 11102, we may require terminal facilities(159) owned by one railroad to be
used by another if the use is "practicable and in the public interest without
substantially
impairing the ability of the rail carrier owning the facilities . . . to handle
its own business." In
approving the merger in UP/SP, we found that, in a similar assumption of
terminal trackage
rights, our exercise of override authority was unnecessary in view of the
availability of relief
under section 11102. SeeUP/SP, Decision No. 44, slip op. at
170. The applicants in UP/SP
sought a similar override under the immunity provision of section 11321(a), but
they had also
filed, in an embraced proceeding, a separate application for terminal trackage
rights. Here,
although an application or petition under section 11102 is not an absolute
prerequisite, additional
evidence of a need to override the antiassignment provisions in Gateway's
Cahokia/Willows
trackage rights agreements would be necessary before that relief could be
granted. Applicants
may file a separate application or petition under section 11102 if they believe
that relief under
that section is warranted.

Housatonic Railroad Company(HRRC). HRRC
is a small Class III railroad operating
in Massachusetts, Connecticut, and New York. It currently connects only with
Conrail, and after
the transaction it will connect only with CSX. HRRC's request for a condition
granting trackage
rights to permit HRRC to improve its situation by being able also to reach NS,
CP and B&M has
not been justified. HRRC has also asked that its existing divisions and rate
agreements with
Conrail be preserved. CSX has agreed to continue these agreements for their
duration. To the
extent that HRRC's pleading can be read as a request to perpetuate such
agreements beyond that
time, no justification has been presented. Applicants represented at oral
argument that they
would deal fairly with this small carrier, and we will require that applicants
do so.

Finally, HRRC seeks a remedy for the loss by some of its shippers of
HRRC/Conrail
routings that will now become HRRC/CSX/NS routings. We have already granted a
remedy
directly responsive to this and other analogous situations by extending the
NITL agreement
single-line to joint-line protections to cover them, at the option of the Class
III carrier. We
assume that HRRC will invoke this option.

Illinois Central Railroad Company(IC).
IC asks that we impose two conditions,
divestiture of a short but strategic CSX line (Sub-No. 62) and a competitive
routing condition.
IC requests that we order CSX to sell it about 2 miles of CSX mainline, the
"Leewood-Aulon
Line," near Memphis, TN, an important link for IC's north-south traffic. As an
alternative to
divestiture, IC suggests that we impose a condition requiring joint dispatching
of that line.

With regard to the first condition, IC states that, because CSX owns and
dispatches this
line, it has a direct effect on IC's operations in Memphis and systemwide,
which it claims will be
harmed by the transaction. The transaction will allow CSX to compete directly
with IC for the
large volumes of traffic currently moving in IC-Conrail joint-line service, and
thus may place
more CSX traffic on the line over which IC has trackage rights. Applicants
admit that IC's trains
have experienced delays through Memphis, but assert that CSX is working to
avoid the delays.
Because these delays are an existing problem, and not an effect of the
transaction, applicants
state that they are not a proper basis for relief. CSX and its predecessors
have owned and
controlled dispatching over the line for IC and its predecessors for more than
90 years.

Moreover, applicants state that divestiture could cause severe problems for
CSX because
the Leewood-Aulon line is part of a CSX mainline that carries substantial
traffic in interchange
with BNSF and UPRR. Divestiture could interfere with CSX's use of the Memphis
gateway.
Applicants also indicate that IC's proper remedy is that contained in the
trackage rights
agreement, which requires CSX to be reasonable, fair, and nondiscriminatory to
all parties using
the line, and provides for mandatory arbitration of disputes.

We are denying IC's request that CSX divest ownership and control of the
Leewood-Aulon line to IC. No justification has been presented for this extreme
remedy that could result in
serious harm to CSX's ability to provide service. Nevertheless, we believe
that the public interest
requires us to do what we can to prevent carrier disputes such as this one from
impairing the
service that the carriers provide to their shippers. Accordingly, we will
impose a condition
requiring CSX to meet with IC to attempt to resolve this dispute concerning
Memphis
dispatching, and to report back to us on the results of this discussion within
30 days of the
effective date of this decision.

IC's second request is for a condition to preserve its existing routings
with Conrail.
Because it has been unable to reach an agreement with CSX, IC argues that CSX
will favor what
IC contends are less efficient IC/CSX joint-line routings via New Orleans and
Memphis over
what IC contends are more efficient IC/CSX joint-line routings via Chicago,
East St. Louis, and
Effingham, IL. Under IC's proposed condition, CSX would be required to enter
into joint rates
with IC for the movement of traffic to or from former Conrail points via its
Illinois gateways that
would provide CSX with the same revenue per mile as CSX would receive over its
long-haul
route between the same origin and destination. IC contends that this
requirement would prevent
CSX from denying a shipper access to existing service options via those
gateways by
commercially closing the route.

We are denying IC's request for the imposition of a routing condition. As
applicants
correctly note: "IC's proposal goes well beyond even the repudiated
DT&I conditions . . . in
asking the Board to impose a formula to cap CSX's divisions." SeeTraffic Protective
Conditions, 366 I.C.C. at 115-26. IC sought similar relief, including the
same formula for setting
divisions, which the ICC denied in BNSF, slip op. at 15-16 & 93-94.
We continue to believe that
conditions of this type are inefficient, anticompetitive, and contrary to the
public interest.

Livonia, Avon, and Lakeville Railroad Corporation(LAL). LAL is a Class III
Rochester-based railroad that now connects only with Conrail; after the
transaction it will
connect only with CSX. LAL's primary concern is the removal of the "firewall"
that prevents it
from crossing the Genesee Junction Yard to connect directly with Rochester and
Southern
Railroad, Inc. (R&S). This connection, which is supported by the Genesee
Transportation
Council (GTC), would permit it to reach NS, which is acquiring Conrail's
Southern Tier Line,
and CP. Dating back to the Final System Plan, LAL's predecessors have been
unable to connect
with R&S' predecessors. Thus, LAL's responsive application to overcome
this barrier (Sub-No.
39) might appear to be unrelated to any harm caused by this transaction. But,
LAL also argues
that a significant number of its shippers who now use LAL/Conrail service will
be forced to shift
to inefficient, three-carrier LAL/CSX/NS service. This allegation is backed by
strong supporting
statements of a number of shippers on its lines, who document how this change
in service will
harm their businesses.(160) LAL has explained
that certain grain shipments it originates to what are
now Conrail points on the Delmarva Peninsula and in Pennsylvania will be
particularly affected,
depriving Western New York farmers of an important outlet for their products.

Applicants assert that the new, three-carrier move that LAL and its
shippers have
requested, LAL/R&S/NS, is no less cumbersome than the three-carrier move it
is intended to
replace. We disagree. Shortline carriers like LAL and R&S have shown
themselves capable of
providing seamless service in conjunction with their Class I connections. And,
LAL has
explained that it expects no problems coordinating activities with R&S
within Genesee Junction
Yard. LAL has noted that its management can reach R&S headquarters for any
needed face-to-face meeting with a 25-minute drive from Lakeville or a 5-minute
drive from Genesee Junction
Yard. Thus, within 60 days of service of this decision, we will require CSX to
negotiate an
agreement with LAL that permits that carrier to operate over the approximately
1 route mile of
track within Genesee Junction Yard necessary to reach a connection with
R&S. If the parties are
unable to reach an agreement within that time frame, they may submit their
separate proposals to
us.

Finally, we note that, as explained above, we have been generally unwilling
to grant the
relief requested by numerous other shippers whose single-line service will
become joint-line
service, since that relief would have unduly burdened the transaction by
granting CSX and NS
trackage rights over each other's lines. That is not the case here. The
relief we are granting to
LAL and its shippers, which only requires LAL operations over a little-used,
1-mile segment of
Conrail track, should not noticeably interfere with applicants' planned
operations.

New England Central Railroad, Inc.(NECR). NECR is a Class III railroad operating a
primarily north-south rail line from East Alburg, VT, south to New London, CT.
NECR
complains that the transaction will not give New England shippers two-carrier
service, and will
eliminate Conrail's role as a "neutral" carrier.(161) In addition, NECR insists that the
transaction
will result in NECR's losing traffic to the extent that it might threaten
NECR's survival. To
offset these losses, NECR seeks approximately 256 miles of trackage rights from
Palmer, MA, to
the North Jersey SAA.

The State of Vermont is concerned about the possible adverse impact of this
transaction
on NECR, whose lines are used by Amtrak for the Vermonter service.
Vermont has provided
financial support for this particular Amtrak service. Vermont states that the
financial failure of
NECR would terminate that carrier's ability to make available quality trackage
between Palmer,
MA, and St. Albans, VT, to Amtrak. Amtrak would then seek to pass along
additional costs to
the state.

Applicants argue, however, that NECR will be in the same position after the
transaction
as it is now, with its current connection with Conrail at Palmer, MA, being
replaced by a
connection there with CSX. Applicants also insist there will not be any loss
of essential rail
services supplied by NECR, and that the trackage rights NECR seeks over CSX
would create
severe operational problems.

NECR's claims that harm will result from Conrail's disappearance as an
allegedly
"neutral" connection to CSX and NS, and that CSX will be a more dominant
carrier than Conrail
has been, are baseless. CSX and NS have no incentive to foreclose efficient
through routes
following the division of Conrail. To the contrary, applicants have expressed
their intention to
maintain efficient routings, and any failure to do so could result in
challenges under the Board's
competitive access rules. Further, CSX has agreed to assume Conrail's
agreements with NECR.

Even though we agree with applicants that NECR's diversion estimate of $8.0
million is
overstated, we think that NECR will suffer some financial harm from this
transaction.
Applicants' diversion estimate of $1.6 million per year of its gross revenue of
about $16-17
million per year seems more reliable. In coming up with its $8 million figure,
NECR assumed
that all of its movements of paper and wood products received from Canadian
origins would be
diverted. The record shows that these products are moved south over NECR and
are transloaded
to motor carriers for delivery over a broad area that already includes numerous
points served by
CSX and NS. NECR has failed to demonstrate that these movements from nearby
Canadian
origins will be replaced by single-line movements from CSX or NS southeastern
origins. These
two carriers have the capacity to provide single-line service of forest
products from many origins
to these destinations now, but they have not captured this business, perhaps
because the
particular forest products moving from Canada have no exact substitute in the
Southeast. There
is no reason to believe that this traffic will now all be diverted simply
because CSX and NS have
extended their routes into the Northeast.

NECR points out two shippers of northbound lumber that it characterizes as
"being
susceptible to immediate diversion." NECR notes that these two companies
receive southern
yellow pine lumber originating on applicants' lines in the Southeast. NECR
argues that, if the
transaction is approved, CSX will be able to provide single-line service as
opposed to joint-line
service with NECR, and that CSX will attract this business through new truck
transloading
facilities that it will establish. NECR fails to explain why CSX would be any
more likely to
pursue such a strategy than Conrail is now. If NECR forms an efficient part of
a through route,
its services will continue to be used.

Despite the fact that its diversion evidence is flawed, NECR has shown that
it will be
financially harmed by this transaction. Moreover, it is clear that NECR
provides important
services both for its shippers and for Amtrak. Accordingly, to ensure NECR's
continued ability
to provide these services, we will require applicants to grant NECR trackage
rights as sought
between Palmer, MA, and Springfield, MA. These trackage rights will facilitate
through
movements with NECR's affiliate, Connecticut Southern Railroad. We will
require applicants to
attempt to negotiate the details of these trackage rights arrangements with
NECR. If the
negotiations prove unsuccessful, the parties may submit separate proposals to
us within 30 days
of the effective date of this decision.

North Shore Railroad Company (NSHR) and affiliates. NSHR
and its affiliates --
Juniata Valley Railroad Company (JVRR), Nittany & Bald Eagle Railroad
Company (NBER),
Lycoming Valley Railroad Company (LVRR), Shamokin Valley Railroad Company
(SVRR),
and Union County Industrial Railroad Company (UCIR) -- ask that we "note for
the record" the
settlement agreement they have entered into with NS. As we have noted
elsewhere in this
decision, we are requiring applicants to adhere to any representations made to
parties in this case.

Philadelphia Belt Line Railroad Company(PBL). PBL is a small Class III railroad in
Philadelphia. Although its lines are now composed of three discrete segments
totaling about 16
miles, PBL claims that its original 1889 charter was intended to allow it to
function as a
continuous "belt" railway serving Philadelphia. PBL's goal of achieving that
status is a
longstanding one that has no nexus to this transaction.(162) To the extent that PBL's "beltline
principle" may have any valid contractual basis, we will grant the relief that
PBL seeks by ruling
that any such contracts are not intended to be preempted by our approval of
this transaction.

Providence and Worcester Railroad Company (P&W).
P&W is a regional freight
railroad operating in Massachusetts, Rhode Island, Connecticut, and New York.
It supports the
primary application.(163) Nonetheless, it has
advised us that, under an Order of the Special Court
(Order) dated April 13, 1982, P&W has the right to acquire the terminal
properties known as
New Haven Station "if Conrail elects to withdraw from or abandon or discontinue
freight service
obligations" at that location. P&W has sought an interpretation of the
Order and a declaration of
its rights from the statutory successor to the Special Court, the United States
District Court for
the District of Columbia. On January 22, 1998, that court ruled that this
matter was not yet ripe
for adjudication, since the Conrail control proceeding was still pending before
us.

It appears to us that our approval and the eventual consummation of this
transaction will
not trigger P&W's rights under the 1982 Order because Conrail will continue
to own New Haven
Station and will therefore not withdraw from, abandon, or discontinue freight
service there. This
view is apparently shared by the FRA Chief Counsel. CSX/NS-177, Vol. 2A at
22-23. But these
views may not represent what would be the ultimate determination of the
District Court, which
would have primary jurisdiction in interpreting the Order. Nor need we,
because of our ultimate
disposition of the issue, adjudicate applicants' claim that, "because P&W
has, for a valuable
consideration, agreed to support the transaction contemplated by the
Application, it is
accordingly estopped from denying CSX the quiet enjoyment of New Haven
Station."

Rather, we will specifically find that applicants' continued ownership and
use of New
Haven station is an integral and necessary part of the underlying transaction
before us, and that
any rights that P&W might otherwise have been found to have under the
Order, must therefore
be preempted under 49 U.S.C. 11321(a). As applicants have explained, a core
purpose of that
immunity provision is that a successor carrier must be allowed to operate
property acquired
through a Board-approved transaction.

R.J. Corman Western(RJCW). RJCW filed a
responsive application (Sub-No. 63)
requesting trackage rights on, or ownership of, 2 miles of Conrail line in
Lima, OH. RJCW is a
Class III railroad, operating between Glenmore, OH, and the Indiana/Ohio border
via Lima.
RJCW's only rail connection is at Lima, with Conrail. Traffic moving to or
from the Glenmore-Lima line is now switched by Conrail to CSX and NS over the
2.3 miles of line that RJCW seeks
to operate over. RJCW has attempted unsuccessfully to obtain this line from
Conrail in the past.
CSX will now obtain this segment through the transaction.

RJCW claims that CSX will prefer to switch RJCW's traffic to its own lines,
and will
increase the very low existing switching charge of $60 per car for RJCW's
traffic to reach NS. It
also argues that CSX will raise its line-haul rates and/or diminish the level
and frequency of
interchange if it controls the switch movement. RJCW has offered no basis upon
which to
conclude that CSX will not maintain reasonable reciprocal switching rates or
that CSX will have
an economic incentive to restrict the movement of RJCW's traffic. The
presumption under our
precedent and economic theory is to the contrary. Moreover, the NITL agreement
preserves
existing switching charges for 5 years, with an annual inflation adjustment,
making further relief
concerning this issue unnecessary.

RJCW essentially seeks to improve its position by obtaining a strategic
piece of rail line
that would give it direct access to two Class I carriers. RJCW's
post-transaction competitive
position will be unchanged. CSX will simply step into Conrail's shoes at Lima;
RJCW will still
have one connection, CSX instead of Conrail, and will be able to move traffic
to interchange
with NS through a switch movement, just as it does today. In sum, RJCW has
provided no
grounds for this additional relief, and the oversight condition we are imposing
will permit us to
continue to monitor the situation.

The Elk River Railroad, Incorporated(TERRI). TERRI is a small Class III railroad
originating coal in South Central West Virginia. Although its sole Class I
connection is now
with CSX, before the transaction it had been pursuing a build-out option that
would, if
successful, have permitted it to interchange with Conrail. The relevant
Conrail line is being
acquired by NS, which, TERRI claims, will not have the same interest in
handling this coal
traffic because it handles other competing coal traffic.

TERRI's situation will remain largely the same as it was before the
transaction. It will
continue to have access to one Class I carrier, with a possible build-out
option that may entail
considerable expense. NS has stated that it is willing to work with TERRI to
establish an
appropriate interchange if TERRI completes its proposed build-out. It is also
willing to discuss
the issue of rehabilitating or selling to TERRI the line between Falling Rock
and Charleston.
Given these representations, which we expect to be adhered to, and the fact
that TERRI's
situation is not substantially changed, we see no need to require any of the
good faith bargaining
conditions that TERRI seeks.

Wheeling & Lake Erie Railway Company (W&LE).
W&LE has filed a responsive
application and has requested numerous conditions that it claims are necessary
to alleviate
merger related harm.(164) Senator Mike
DeWine, Congressman Ralph S. Regula, Stark
Development Board (SDB), the Ohio Attorney General, Ohio Rail Development
Commission
(ORDC), ISRI, and others have supported W&LE in this regard.(165) Although W&LE has made
some general assertions about the competitive impact of the merger, it does not
propose its
conditions as a competitive solution to offset the diminution of competition
experienced by any
shipper or group of shippers.(166) Rather,
the conditions W&LE seeks are offered to offset the
adverse financial impact of the transaction on W&LE. W&LE claims that
the transaction will
divert between $12.7 and $15 million of traffic per year from its lines.
W&LE maintains that,
because it is a highly leveraged carrier, its balance sheet will not permit it
to weather such an
impact and still provide "essential services." W&LE claims that its
proposed conditions will
generate about $11 million per year in additional traffic to offset its
losses. Revenue losses could
make it difficult for W&LE to continue to provide service to the numerous
shippers, including
the NEOMODAL Terminal, that have testified that they value the W&LE
service, and that it
serves as a spur to competition.

Although W&LE's projections of a $12.7 to $15 million yearly gross
traffic revenue loss
are overstated, it does appear that W&LE would lose substantial revenue due
to this transaction.
Applicants' estimate of $1.4 million may be somewhat understated. They
correctly note that
much of W&LE's traffic both originates and terminates on its system, and
none of that traffic is
at risk. Many of the losses included in W&LE's $15 million figure
represent reductions from a
baseline that includes a substantial projected traffic increase; we think those
projections are
overly optimistic and unwarranted. About $3.6 million of the traffic losses
included in the lower
$12.7 million figure relate to the "phantom train" issue. This refers to
traffic generated by a run-through train that was operated for about 6 weeks in
1997, but no longer operates. It is
inappropriate to attribute to the merger traffic losses that have already
occurred. Moreover, it is
inaccurate to assume, as W&LE uniformly does here, that NS single-line
service will always
replace a joint NS/W&LE service. If the W&LE routing and service is
more efficient, as W&LE
contends, then it is likely that NS would continue to use that service.

Even with these adjustments, however, it is apparent that a substantial
amount of traffic,
probably between $1.4 and $3.0 million, could be diverted from W&LE because
of this
transaction. Much of the traffic loss claimed by W&LE is due to new, more
efficient routings
afforded applicants by the transaction rather than to any enhancement of
applicants' market
power. Nevertheless, we think that the combination of W&LE's precarious
financial situation
and these rather heavy losses calls out for a remedy to preserve essential
services and an
important competitive presence here. W&LE not only provides valuable
competitive service to
shippers, but it also provides a transportation network that could be important
to shippers if the
major carriers have difficulty providing service.

That being said, we recognize that the extensive conditions W&LE is
seeking are a
substantial overreach both in terms of geographic scope and financial impact.
Certainly, W&LE
has not justified $11 million of new traffic as relief, nor has it justified
such intrusive conditions
as permitting it to extend its operations over applicants' lines all the way to
Chicago.

We will require applicants to provide certain remedies to W&LE to
prevent further
erosion of W&LE's financial viability due to this transaction. We will
require applicants to
provide: (a) overhead haulage or trackage rights access to Toledo, OH,
with connections to the
Ann Arbor Railroad and other railroads there; (b) an extension of
W&LE's lease for the Huron
Docks and trackage rights access to the Huron Docks over NS' Huron Branch;
(c) overhead
haulage or trackage rights to Lima, OH, including a connection to the Indiana
and Ohio Railroad.
Further, we will require that applicants negotiate with W&LE concerning
mutually beneficial
arrangements, including allowing W&LE to provide service to aggregate
shippers or to serve
shippers along CSX's main line from Benwood to Brooklyn Junction, WV. If these
parties are
unable to agree on a solution with regards to items (a), (b), and (c) within 90
days of the service
date of this decision, we will institute expedited proceedings to resolve these
matters. Finally,
we expect the parties to inform us of any mutually beneficial arrangements that
they have
reached.

SHIPPERS AND OTHER PROTESTANTS

Aggregate Shippers. A number of aggregate shippers (i.e.,
National Lime and Stone
Company (NL&S), Wyandot Dolomite, and Redland Ohio) separately have
expressed concern
over the potential impact on their businesses resulting from the loss of
Conrail single-line
service, and each has sought specific conditions. Martin Marietta Materials
(MMM), which also
raised similar concerns, has reached a settlement agreement with applicants
resolving its
concerns. These shippers claim that aggregate sales are extremely sensitive to
even slight
changes in freight rates, and that they will suffer significant harm that is
distinguishable from the
harm to other freight shippers when their Conrail single-line service is
replaced with CSX/NS
joint-line service. These shippers argue that they are particularly dependent
upon efficient rail
service because shipping aggregate materials by motor carrier or barge is
usually not a viable
option.

As MMM points out, applicants' witnesses have acknowledged that going from
single-line service to joint-line service is less efficient and tends to be
more costly. MMM-3 at 8-10
and 19-21 (citing to Snow Dep. Tr. at 169-170, and Gaskins Dep. Tr. at 15-16).
Applicants
explain that "[c]harging a single-line rate for a joint-line service, where
obvious extra handling
(to effect the interchange) is involved, is clearly apt to be uneconomic for
the participating
railroads." CSX/NS-190 at 26. Applicants argue, however, that aggregate
shippers do not show
any harm to competition or essential rail service. Nevertheless, these
shippers claim that
aggregates rarely, if ever, move in two-railroad, joint-line service, and seek
conditions "designed
to correct certain new inefficiencies that would otherwise be introduced into
the movement of
[their] product post-Transaction." See Wyandot-5 at 3-4.

These conditions fall into the following categories: (1) recreating
single-line service;(167)
(2) extending the NITL single-line to joint-line rate freeze to 5 years;(168) (3) guaranteeing future
rail service by NS or its successor;(169) and
(4) guaranteeing future rail service by W&LE or its
successor.(170)

As applicants acknowledge, "compared to lime, stone aggregates generally
move at a
lower rate per ton and thus generally do not move in a joint-line rail service
as frequently as
lime." CSX/NS-176, R.V.S. Moon at 6. Because we find that lime often moves in
joint-line
service, we will limit relief to the movement of stone aggregate, particularly
for those
movements over 75 miles. NL&S concedes, as applicants point out, that
NL&S ships a
significant quantity of its product by truck, but NL&S insists that the
characteristics of
aggregates and crushed rock are such that, beyond very short distances, truck
transport is simply
not a viable option. NL&S states that, for large volume (more than 1,000
tons) and long-distance
shipments (more than 75 miles), rail transportation is essential, and there is
no practical
substitute for rail. In addition, Wyandot points out (Wyandot-5 at 8-9) that
the ICC had
described the economics of aggregate transport in a prior case where it said:

[For aggregates], truck transport is prohibitively expensive for the long
haul;
crushed stone is a high-bulk, heavy loading commodity, for which motor carriers
are effective for distances of less than 75 to 100 miles.(171)

We note that the relief for run-through operations and the handling of
blocked cars that
applicants have offered appears to be operationally feasible and should
mitigate the service
concerns of these protestants. Moreover, at oral argument, applicants offered
to provide each
other trackage rights to permit single-line service by either CSX or NS for
existing aggregate
movements.

Wyandot and NL&S have filed letters objecting that the relief proffered
by applicants is
inadequate because it seems to be limited to certain existing aggregate
movements, but does not
cover all of them. Further, they claim that they may have other customers at
some time in the
future that applicants will not be able to serve in single-line service.

We will require applicants to provide single-line service for all existing
movements of
aggregates as offered at oral argument, provided they are tendered in
unit-trains or blocks of 40
or more cars.(172) In other circumstances
including new movements, we will require applicants and
aggregate shippers to work out run-through operations (for shipments of 60 cars
or more) and
pre-blocking arrangements (for shipments of 10 to 60 cars) for shipments moving
at least 75
miles.

We disagree with the analysis of Wyandot and NL&S that this provides an
insufficient
remedy for possible future movements. The harm of losing single-line service
is very modest,
and the future harm that Wyandot and NL&S claim is speculative. The
agreement to provide
run-through operations is more than adequate to address these concerns about
future traffic
patterns.

In addition, under the NITL agreement, applicants will retain in effect for
3 years the
existing Conrail rate (subject to RCAF-U increases), and applicants will "work
with [single-line
to joint-line shippers] to provide fair and reasonable joint line service."
Also, applicants indicate
that they will honor Conrail contracts until their expiration. In addition, as
discussed previously,
applicants are directed to negotiate with W&LE regarding service to
aggregate shippers. In light
of the operational relief we have granted, we do not believe that it is
necessary to extend the rate
freeze to 5 years as these shippers have requested.

Agricultural Shipper Interests. National Grain and Feed
Association asks that we
appoint a Conrail Acquisition Advisory Council to develop standards and
performance
measurements, as well as specific reporting measures, that will provide an
accurate portrayal of
implementation by CSX and NS. The American Farm Bureau Federation, the
American Feed
Industry Association, the National Cattlemen's Beef Association, the National
Corn Growers
Association, and the National Pork Producers Council request a strong oversight
with periodic
public hearings and requirement of an annual report that evaluates how well the
transition is
proceeding, especially as it relates to agriculture. USDA, which neither
supports nor opposes the
transaction, suggests, in light of service problems that have attended recent
Class I rail mergers,
that we adopt a "go slow" approach to implementation.(173) Cargill, which is engaged in the
merchandising and handling of agricultural commodities, supports the
transaction, which it
believes will add to the competitive balance in the Eastern United States and
will provide more
efficient routings for rail freight. Cargill requests that we ensure that
labor implementing
agreements are in place on or shortly after the effective date of this
decision, and that CSX and
NS management have sufficient time after our approval to plan for the break-up
of Conrail.

We believe that these parties' concerns are adequately and appropriately
addressed by our
imposition of the NITL agreement, as we have expanded upon and extended it,
including the
ongoing role of the Conrail Transaction Council, and by the extensive oversight
and monitoring
we will be undertaking.

AK Steel Corporation(AK Steel). AK
Steel's main interest in this proceeding is to
assure that it has access to both NS and CSX to handle its shipments of iron
ore moving through
the Toledo Docks. Although there has been some confusion on this issue,
applicants have
assured us that service from both carriers will be available. We will hold
applicants to that
representation. Other relief sought by AK Steel in an effort to ensure this
result is thus
unnecessary, and will be denied.

American Electric Power Corporation (AEPCO). AEPCO
operates a coal-fired,
electric plant, the Cardinal Plant, on the Ohio River. AEPCO is now rail
served by W&LE, and
apparently also by Conrail, made possible through a trackage rights agreement
not yet filed with
the Board, over a small segment of W&LE. AEPCO acknowledges that NS, which
will acquire
the trackage rights at issue, would purchase the small segment necessary to
serve its plant if
W&LE were to fail. AEPCO's main concern is that the demise of the W&LE
as a result of this
transaction would reduce its rail options from two to one. In light of the
substantial relief that we
have accorded to ensure W&LE's continued viability in this proceeding, we
do not believe that
the conditions that AEPCO proposes are necessary.(174)

American Trucking Associations(ATA).
ATA has raised issues relating to equipment
used in intermodal service, grade crossings, and certain railroad practices it
claims are
discriminatory. None of these issues has any nexus to this transaction.
Moreover, issues
concerning general problems related to grade crossings and equipment used in
highway service
would best be addressed to DOT. The conditions requested by ATA will be denied.

ASHTA Chemicals (ASHTA). ASHTA is a chemicals shipper
located on Lake Erie in
Ashtabula, OH. It admits that it is currently solely served to Conrail. After
the transaction, it
will be served solely by CSX. It claims generally that it will be placed at a
disadvantage vis-a-vis other shippers that will receive better or more
competitive service as a result of the
transaction. It seeks a competitive access remedy or a merger condition to
permit service by a
second Class I carrier, NS, by imposition of a reciprocal switching
arrangement. ASHTA has
provided no basis for the imposition of such a remedy because it has shown no
merger related
harm. Nor has it provided a basis for relief under section 11102, because it
has done little more
than to indicate a preference for two-carrier service.

ASHTA also raises issues about the current routing by Conrail of its
hazardous chemicals
traffic via Buffalo, which it claims is unnecessarily circuitous and unsafe.
CSX stated at oral
argument that it is willing to work with ASHTA to arrange routing and
classification more to
ASHTA's preference. We will hold CSX to that representation.

APL Limited(APL). APL has requested
numerous conditions, most of which relate to
its opposition to applicants' request that we override any antiassignment or
other similar clauses
in shippers' contracts with Conrail that is discussed above. As noted there,
we have partially
granted the relief that APL seeks by limiting the override of antiassignment
and other similar
clauses to 180 days from Day One. After that time, APL will have the right to
exercise all of its
contractual rights and, if they permit, contract with both NS and CSX in this
region.

APL has also raised arguments concerning potential discrimination against
it by CSX.
CSX has explained that its intermodal subsidiary, CSX Intermodal (CSXI),
regularly deals with
third party service providers, including those affiliated with ocean shipping
companies, and that
40% of CSXI's intermodal business comes from international ocean shipping
customers,
excluding CSX's Sea-Land subsidiary. Further, allegations concerning the
likelihood of CSX
using its ownership of barge lines to discriminate against or competitively
disadvantage other
water carriers were raised and rejected in CSX Corp. -- Control -- American
Commercial Lines,
Inc., 2 I.C.C.2d 490 (1984); aff'd, Crounse Corp. v. ICC, 781
F.2d 1176, 1193 (6th Cir. 1986),
cert. denied 479 U.S. 890 (1986) (Crounse); Water Transport
Assoc. v. ICC, 715 F.2d 581 (D.C.
Cir. 1983). The arguments APL raises here are not materially different from
the arguments that
were rejected in those cases.(175) While we
understand APL's concern, we think that the prospect
of such unlawful practices remains relatively slight even after this
transaction. Nevertheless, our
general oversight of the transaction can address any issues that arise in this
regard.

Finally, the confidentiality provisions that we have imposed should prevent
any access by
CSX's water and intermodal affiliates to confidential contract information
about APL. See
Decision No. 87 in this proceeding.

Centerior Energy Corporation(Centerior). Centerior is a coal burning public utility
company. It claims that a settlement agreement between applicants and one of
Centerior's major
suppliers, The Ohio Valley Coal Company (Ohio Valley), will not remedy the
harms to Centerior
from the transaction. Centerior also claims that the settlement agreement is
itself
anticompetitive, and asks that we nullify it. Applicants respond that
Centerior's argument is
based on a misunderstanding of the agreement, which allegedly preserves the
status quo relating
to Centerior's freight rates for a number of years, eliminating the basis for
conditions Centerior
seeks.

Applicants have not asked us to approve the Ohio Valley agreement as a
condition to the
transaction, and we are not approving it. Thus, no antitrust immunity attaches
to this agreement.
In any event, applicants have convinced us -- with confidential material
submitted under seal
and provided to Centerior's counsel -- that the settlement agreement will not
be anticompetitive
or inconsistent with Centerior's interests. If anything, it should benefit
Centerior, rather than
harm it.

Centerior also seeks two-carrier access to its Eastlake, Ashtabula, and
Lake Shore
plants.(176)

This relief, which would markedly improve Centerior's current one-carrier
access, has
not been justified. Centerior also raises single-line to joint-line concerns,
and this issue has been
discussed in a previous section.

Consumers Energy Company (Consumers). Consumers, an
electric and gas utility
company serving customers in Michigan, operates five coal-fired plants. Its
main power plant is
Campbell Station, near West Olive, MI, which burns 70% of the coal used by
Consumers.
Campbell is now served exclusively by CSX, and most of its coal is received
from CSX origins.
Nevertheless, Consumers claims that it will be unable to take advantage of
Monongahela coal
now served by Conrail, and that the transaction will actually increase CSX's
market power over
Consumers by concentrating CSX's dominance over appropriate coal sources.

Consumers has failed to make its case in this regard. As a threshold
matter, it has not
shown that it is currently able to take advantage of any appropriate Conrail
coal origins that
would now be CSX origins. In any event, Consumers has not even attempted to
overcome our
presumption by showing that the one-lump theory does not apply to its
particular circumstances.
Accordingly, its request for a second Class I carrier to serve Campbell must be
denied.
Consumers has also raised acquisition premium arguments and related requests
for relief. This
relief will be denied for the reasons set forth in the "Acquisition Premium"
section.

Eighty-Four Mining Company (EFMC). EFMC operates Mine 84,
which is a
Pittsburgh Seam mine that is not on the MGA lines that are to be served by both
NS and CSX.
Mine 84 is on a line running north from West Brownsville, PA, that would be
served only by NS.
The MGA lines, which run south from West Brownsville into Southern Pennsylvania
and
Northern West Virginia, include 6 mines that produce coal that is very similar
to that produced at
Mine 84, and that is generally used by the same customers. EFMC would like
two-carrier access
to be extended to Mine 84.

EFMC has not provided adequate justification for us to make an exception to
our usual
rule that we will not equalize merger benefits among competing shippers. Mine
84 is on a
different rail line than these other mines that are receiving two-railroad
service as a result of this
transaction. Moreover, applicants noted at oral argument that Mine 84 was
recently purchased
by CONSOL, Inc. (CONSOL),(177) which also owns
several of the MGA mines that will be
receiving new two-railroad service. Thus, some of these MGA mines are Mine
84's competitors,
while others are its affiliates. We cannot say that CONSOL or Mine 84 will be
substantially
harmed by this transaction.

Fort Orange Paper Company (FOPC). FOPC manufactures
clay-coated recycled box
board at Castleton-on-Hudson, NY, near Albany. This plant is exclusively
served by Conrail
along a segment of its east-of-the-Hudson line that is used primarily for
passenger traffic, and is
just north of the bridge where most Conrail traffic now crosses the Hudson
River to reach Selkirk
Yard. FOPC now uses rail for about 50 carloads of (inbound) raw material, and
the majority of
these (clay and waste paper) are exempt from regulation.

CSX will take over operations on Conrail's east-of-the-Hudson line. While
FOPC is
concerned that CSX may subject it to unreasonable future rate increases or
other actions, it no
longer opposes the application because it "cannot establish that it will
certainly suffer harm as a
result of the Transaction." FOPC-6 at 3. It supports NYDOT's responsive
application, and
requests that we impose oversight for at least 5 years. FOPC intends to
participate in the
Board's oversight process as necessary to protect its interests.

As explained above in the section entitled East Of The Hudson, we have
imposed a
condition that may help FOPC, requiring CSX to negotiate an agreement with CP
to permit
either haulage or trackage rights, not restricted as to commodity or geographic
scope, over the
east-of-the-Hudson line from Fresh Pond to Selkirk (near Albany). Furthermore,
the extensive 5-year oversight and monitoring process that we will be
undertaking is responsive to FOPC's
concerns.

GPU Generation, Inc. (GPU). GPU operates 87 electric
generation units. Its interest in
this proceeding is focused on Portland and Titus Stations. These two
coal-burning units in
Pennsylvania are now exclusively served by Conrail and, after the transaction,
will be
exclusively served by NS. GPU asserts that the acquisition premium NS and CSX
have agreed
to pay for Conrail will place significant new pressures on NS to raise rates to
captive shippers
such as itself, and that its opportunity for future maximum rate relief will be
curtailed by the
manner in which the acquisition premium will flow into the regulatory
investment base and into
calculations of URCS variable cost. GPU opposes the transaction, and requests
that, if it is
approved, we impose a condition designed to exclude, for regulatory costing
purposes, the
acquisition premium from applicants' net investment bases in order to protect
GPU and other
captive shippers from being forced to subsidize the premium through higher
rates. GPU's
concerns, and our reasons for denying the relief it has requested, are
discussed above, in the
section entitled The Acquisition Premium.

Indianapolis Power and Light(IP&L). IP&L alleges competitive harm to two of its
plants: Perry K and Stout; DOJ alleges harm to the latter plant only. Perry K
is served solely by
Conrail, which switches coal shipments from either ISRR or INRD, the latter
being 89% owned
by CSX. IP&L argues that it will lose rail competition at Perry K because
a supposedly neutral
Conrail link will be turned into a CSX bottleneck monopoly. As applicants
correctly note,
however, Conrail is already a bottleneck carrier controlling rail access to
this plant. Thus, the
transaction will not create new market power. Further, under applicants'
proposal, NS will
permanently have access via cost-based switching to the plant, a benefit the
plant did not enjoy
before.(178) We conclude that no remedy is
required at Perry K.

Stout, on the other hand, does require a competitive remedy. That plant,
located on
INRD, has had available a routing involving coal originations on ISRR, and an
interline with
Conrail, reaching the plant via a switch performed by INRD. Applicants have
agreed to continue
the current switching arrangement, which IP&L agrees is favorable, but only
for the immediate
future.

Whether IP&L would continue to be able to obtain favorable switching
terms after the
transaction is disputed. Applicants insist that the threat of truck
competition and the ability of
IP&L to shift production to its more efficient Petersburg plant --
competitive restraints that will
continue -- led to these favorable terms. IP&L and ISRR, however, argue
that truck competition
and plant shifting are ineffective at Stout, and that only the threat to build
out to nearby Conrail
lines brought INRD and CSX to terms. Although a substantial amount of Indiana
coal is trucked,
Stout, unlike other IP&L plants that use trucks, is in a city, which makes
truck transport less
practical. We agree with DOJ and IP&L that the most likely primary cause
of competitive
pressure at Stout today is the threat of a build-out to Conrail, which appears
feasible.(179)

To remedy IP&L's potential loss of rail competition, we will allow the
Stout plant to be
served directly by NS (rather than restricting NS to accessing Stout via CSX
switching at
Hawthorne Yard) or INRD switching at Stout, as selected by IP&L.(180) Further, to approximate
more closely pre-transaction market conditions, applicants shall amend their
agreements to
permit NS to interchange with ISRR at its existing milepost 6 for movements to
Stout and Perry
K.(181)

Joseph Smith & Sons(JS&S).
JS&S is a scrap dealer currently served by Conrail and
that can be served by CSX, through a switch over Conrail. After the
transaction, it will be served
by CSX, which will allow NS also to serve through reciprocal switching.
JS&S claims that
switching is temporary under the NITL agreement, but that it is losing the
ability to effectuate a
more permanent solution through a build-out. It has been our policy to
preserve the competitive
advantages made possible by build-outs. After the transaction, JS&S will
retain the opportunity
to build out to reach NS, including NS service over Amtrak's nearby Northeast
Corridor (NEC),
since applicants have reached a successful agreement with Amtrak for service
over the NEC. We
clarify that, if JS&S does build out to any NS connection, NS will be
required to provide service.

JStar Consolidated, Inc. (JStar). JStar, a unit of Jacobs
Industries, Ltd., provides
logistics services at a location near Toledo, OH, served exclusively by Conrail
that, post-transaction, will be served exclusively by CSX. JStar asserts
that, at Toledo, Conrail has played
the role of a "large, neutral switching carrier" when it passes off traffic
beyond the Conrail
system, but that CSX will favor its own routings and traffic sources. JStar
further asserts that the
proximity of its Toledo location to the Detroit SAA will disadvantage its
operations relative to
those of its competitors who will enjoy new two-carrier competition.

We will deny JStar's request for direct access to NS, for the reasons
discussed above in
the sections entitled Vertical Competition Issues and Requests To Be Served By
Both CSX and
NS. Further, to the extent that Conrail now provides switching services that
permit other
carriers to access JStar's movements, these have been preserved under the
reciprocal switching
provisions of the NITL agreement that we are imposing here.

Millennium Petrochemicals Inc. (now known as Equistar Chemicals,
LP). Equistar
is a chemical company with facilities throughout the United States, but its
concern here is its
facility at Finderne, NJ. Conrail now exclusively serves that facility.
Finderne is close to, but
not in, the North Jersey SAA. Equistar is concerned that, after the
transaction, CSX and NS will
have to cooperate with each other in order to switch cars into and out of its
facility. Equistar
claims that the operating plans do not adequately explain how this will be
accomplished.(182)
Accordingly, it asks that the North Jersey SAA be expanded approximately 6
miles to embrace
its facilities.

We have required, and applicants have submitted, detailed operating plans
for the North
Jersey SAA, including the facilities that Equistar is concerned about.
See CSX/NS-119. We
have carefully studied those plans, and they appear to permit safe, efficient,
and adequate
operations in this area. Of course, we will continue to monitor situations
such as these to ensure
adequate service. In sum, provided that applicants are required to carry
through on their
representations regarding service arrangements at Finderne, Equistar is not
likely to experience
any transaction related harm.

New York/New Jersey Foreign Freight Forwarders & Brokers
Association
(NYNJFFF&BA). NYNJFFF&BA is an association of over 100
freight forwarders and
customhouse brokers that provide a variety of ocean and intermodal
transportation services in the
New York/New Jersey port area. It is concerned with the potential for
post-transaction service
problems within the North Jersey SAA, and has requested that we require
applicants to publicly
disclose details of their proposed management and operating plans for the SAA.
We have
requested, and applicants already have provided, appropriate details of their
plans for operating
the North Jersey SAA.

In addition, NYNJFFF&BA's concerns are adequately and appropriately
addressed by
our imposition of the NITL agreement, as we have expanded upon and extended it,
including the
ongoing role of the Conrail Transaction Council, the requirement that all
necessary labor
implementing agreements and management information systems be in place prior to
the start of
separate operations over the Conrail lines, and the extensive oversight and
monitoring that we
will be undertaking.

Niagara Mohawk Power Corporation (NIMO).(183) NIMO is an electric utility company
serving upstate New York. Its main concern is with coal-fired generating
plants at Tonawanda
and Dunkirk, NY. These two stations are now served exclusively by Conrail, and
will be
exclusively served by CSX after the transaction. These plants burn Pittsburgh
Seam(184) coal that
now originates on Conrail, much of which will be served by both NS and CSX
after the
transaction. NIMO nonetheless claims that its wholesale energy sales will be
harmed in
competition with other utility companies in the Detroit and South Jersey SAAs.
As explained
above, we do not generally attempt to equalize merger benefits among competing
parties, and
NIMO has presented no particularly compelling reason to do so here. Its
request for relief in
terms of access by a second carrier to its Tonawanda and Dunkirk plants will be
denied.

Orange and Rockland Utilities (O&R). O&R is an
electric utility company whose
chief concern is service to its Lovett Plant at Tompkins Cove, NY. This plant
is now served
exclusively by Conrail, and after the transaction it will be served exclusively
by CSX. O&R
states that 90% of its coal now originates on NS, and O&R is concerned
that, after the
transaction, CSX will foreclose its access to this coal. It has been our
experience, and that of the
ICC, that rail carriers that have exclusive rights to serve a particular
shipper at destination are
extremely unlikely to deprive a shipper of access to efficient rail routings to
reach the products
they need, even if those routings involve joint-line service with another
carrier. Such bottleneck
destination carriers can ordinarily extract the same return, regardless of
whether they handle the
entire movement. In any event, if CSX refuses to permit such a movement,
competitive access
remedies are available from us.

O&R's other concerns relate to the quality of service. It claims that
Conrail's service has
not been good, and is generally concerned that CSX's service might be worse.
Accordingly, it
asks for an oversight condition. That condition is subsumed within our general
5-year oversight.

PSI Energy (PSI). One of three areas where DOJ alleges
that applicants failed
adequately to address post-merger 2-to-1 situations is PSI's Gibson plant at
Carol, IN, to which
NS transports from Keensburg a small portion of the coal that the station
consumes each year.(185)See DOJ-2, V.S. Woodward at 6. DOJ mentions that Conrail has trackage
rights over a very
short segment from Keensburg into Gibson, making it a competitive alternative
to NS for coal
originating at a nearby Cyprus-Amax mine,(186)
and that, as late as December 1994, Conrail
actually delivered coal using those trackage rights.

Applicants respond that use of Conrail's trackage rights agreement from the
Cyprus-Amax mine at Keensburg to PSI's Gibson plant was terminated on October
24, 1996, when NS
accepted Conrail's August 29, 1996 proposal to end it. Applicants note
correctly that Conrail's
operation under these rights was disadvantaged because the Keensburg-Carol
segment is entirely
separate from other parts of Conrail's system.

DOJ concedes that, if the NS-Conrail termination agreement is valid, then
the Gibson
plant would not be a 2-to-1 point, and that it would not continue to press for
an alternative
remedy at Gibson. DOJ-2 at 23. Although we presume that the cancellation was
valid as a
contractual matter, under existing precedent, trackage rights cannot be
canceled unless we grant
authority for their discontinuance. Thompson v. Texas Mexican Ry., 328
U.S. 134 (1946).
Accordingly, we think that the proper remedy here would be for these unused
rights to be
transferred to CSX rather than NS. CSX's potential service to this plant, like
Conrail's service
before it, would be an "island" operation, and may not prove to be practical or
efficient, in which
case a discontinuance might ultimately prove to be justified. Nevertheless, we
need not address
that issue here.

Potomac Electric Power Company(PEPCO).
PEPCO has reached a settlement
agreement, and has withdrawn from this proceeding. Nevertheless, the
representative of DOJ,
when questioned at oral argument, stated that he believed that PEPCO might
nonetheless be
harmed, depending on the nature of the agreement. As explained below, we find
that, even
absent the settlement, the competitive harm here would have been quite limited,
and that, in light
of the settlement, no additional remedy is required.

PEPCO owns and operates four coal-fired electricity generating facilities:
Chalk Point,
Morgantown, Dickerson, and Potomac River.(187) Conrail currently provides exclusive
destination
service to both Chalk Point and Morgantown, as does CSX to Dickerson, and NS to
Potomac
River.(188) The transaction involves the
transfer of the Conrail line serving PEPCO's two largest
coal-fired plants, Chalk Point and Morgantown, to CSX, making CSX the sole rail
carrier serving
PEPCO's three most efficient, coal-fired plants.

DOJ argues that PEPCO can sometimes substitute power between Morgantown and
Dickerson, a competitive constraint that would allegedly be lost with this
transaction. DOJ
contends that we should therefore require NS rather than CSX to acquire the
entire Conrail line
serving Morgantown and Chalk Point or give NS trackage rights over CSX to serve
those plants.

PEPCO is a member of the Pennsylvania-New Jersey-Maryland (PJM) power pool,
which
dispatches the power of all of the member utilities' generating facilities as a
single system. Thus,
in meeting its own energy demands, PEPCO does not itself determine which plants
within its
own system will be used, or their degree of use. Rather, PJM dispatches power
based on the
relative operating costs of each generating facility.(189) According to PEPCO, during certain
"shoulder" periods, such as late night hours in the Spring and Fall, when both
PEPCO and the
PJM system have excess capacity,(190)
Dickerson, Chalk Point and Morgantown, and thus CSX
and Conrail, compete, and this benefit for PEPCO will be curtailed due to the
transaction.

As applicants point out, each PEPCO plant will continue to be served by a
single rail
carrier, and PEPCO has asserted (in rate litigation that had been pending at
this agency but was
subsumed within the recent settlement with applicants) that its plants are
largely independent of
each other from the standpoint of rail ratemaking. Applicants contend that DOJ
has given
unwarranted weight to the competitive importance of shifting among only PEPCO's
plants here,
and they note correctly that the transaction will actually increase overall
rail competition to the
PJM power pool because certain plants now served by Conrail will be served by
both CSX and
NS. Applicants note correctly that PEPCO has admitted that all three of these
plants are
relatively insensitive to changes in rail rates or delivered fuel costs.(191)

We agree with DOJ that a utility company with several generating plants may
gain
competitive leverage during shoulder periods by shifting power production among
plants. Here,
however, decisions about which plants to emphasize are made by PJM, not PEPCO,
and the three
efficient coal-fired PEPCO plants are not the only PJM plants competing for
load during
"shoulder" periods.(192) We carefully
examined this issue in conjunction with the recently settled
Dickerson rate complaint, and we conclude that even during the shoulder demand
periods,
significant rail rate increases will have only a limited impact on the degree
of coal use at a
particular PEPCO plant.(193)

We conclude that the remedies proposed by DOJ are unnecessary in light of
the
confidential settlement agreement that PEPCO has reached, which apparently
satisfies its
concerns. We are extremely reluctant to second guess PEPCO's assessment of its
own best
interests. Moreover, the remedies DOJ seeks are out of proportion to any
limited harm that
would have resulted to PEPCO from the transaction even without the settlement
agreement.

PPG Industries. PPG has asked for a second railroad to be
able to serve its facility at
Natrium, WV, which is now served exclusively by CSX. PPG has made vague,
general
allegations about its loss of geographic competition through this transaction,
but it has not
explained how this could be so. PPG has not demonstrated that it will be
harmed by the
transaction, and we will deny the relief sought. Further, as discussed in the
section entitled
Wheeling & Lake Erie Railway Company, PPG would benefit from any mutually
beneficial
arrangements agreed to by W&LE and CSX that would permit W&LE to serve
shippers, such as
PPG, with facilities located along CSX's line from Benwood to Brooklyn
Junction, WV.

Resources Warehousing & Consolidation Services
(RWCS). RWCS is a freight
forwarder that operates out of warehouse and terminal facilities located in
North Bergen, NJ, that
are, and will continue to be, exclusively served by the New York Susquehanna
& Western
Railroad (NYS&W), owned by the Delaware Otsego Corporation. In response to
RWCS'
request that it be afforded equal access to CSX and NS, applicants have stated
that RWCS "will
be able to connect to NS via Passaic Junction off the Southern Tier on the
Conrail lines to be
allocated to NS; and to CSX via a connection to be built from North Bergen to
Little Ferry."(194)
CSX/NS-176 at 168. On brief, RWCS indicates that, while it accepts applicants'
statement that
it will be provided the dual access it seeks, it is nonetheless concerned that
CSX and NS "have in
fact purchased NYS&W and are the co-owners."(195) RWCS-4 at 4. RCWS requests that we
impose a condition to ensure that the North Bergen-Little Ferry connection is
built and that
applicants take no steps to restrict its opportunity for access to each of
their systems. We will
require applicants to hold to the representations they have made to RWCS.

Shell Oil Company and Shell Chemical Company (Shell).
Shell is concerned that the
transaction will lead to a deterioration in rail service, acceleration of rate
increases, and a
continued decrease in rail competition. To satisfy its concerns in these
areas, Shell asks that
applicants be required to establish baseline safety and service measurements
for each operating
territory, that we should change the manner in which we regulate rates to
lessen the impact of
future rate increases, and that an open reciprocal switching system such as the
Canadian
interswitching system be implemented. As previously discussed, we believe that
the NITL
agreement, with the existence of the Conrail Transaction Council, appropriately
addresses Shell's
operational concerns. Moreover, we are adopting a 5-year oversight period in
this proceeding,
the same as sought by Shell. We will not adopt Shell's other conditions for
the reasons
expressed herein. See the following discussion regarding Westlake.

Transportation Intermediaries Association (TIA). TIA's
Intermodal Conference,
representing intermodal marketing companies, has experienced certain negative
effects from the
ongoing rail service problems in the Western United States, and is concerned
that this transaction
may result in additional adverse competitive consequences with respect to the
rail intermodal
services used by its members. TIA is specifically concerned that the
transaction may lead to a
reduction in existing rail intermodal service lanes and terminals, increases in
contract volume
requirements, changes in rail contract credit terms, rate increases, and
shortages of containers and
trailers, and that its members may become liable for liquidated damages from
resulting
contractual volume shortfalls.

As we have explained elsewhere, this transaction will significantly expand
rail intermodal
service offerings in the Eastern United States, and enhance the already
substantial level of
rail/truck competition for this important transportation service. We have
projected that
applicants will divert over one million truck movements from the nation's
highways. We see no
need to impose the conditions TIA has requested, but we will be monitoring the
service provided
post-acquisition as part of our 5-year oversight.

Westlake Group of Companies. (Westlake)
Westlake, a petrochemical and plastics
manufacturer, asks that we ensure that an economically viable rail
transportation system will be
sustained after the transaction. It asks for us to impose a condition
protecting shippers from
merger-related rate increases and giving shippers the right to choose
interchange points for their
shipments across the post-transaction Conrail property. It also asks that
applicants be required
to reimburse them for any substantiated service deficiency claims for a period
of up to 5 years
after the transaction.

We see no basis here for imposing these intrusive solutions given
Westlake's failure to
show any particular harm to it from the transaction. Under the statute,
carriers have the initiative
in determining which routes they will maintain for through service with other
carriers. There are
appropriate remedies for shippers under the statute and our regulations if
carriers for some reason
refuse to make available efficient routings or charge unreasonable rates.
Further, if service
problems do arise after approval and consummation of the transaction, our
monitoring and
oversight conditions should provide an appropriate mechanism for identifying
and resolving
them.

LABOR IMPACTS. Our public interest analysis
includes consideration of the interests
of carrier employees affected by the proposed transaction. 49 U.S.C.
11324(b)(4); Norfolk &
Western v. ATDA, 499 U.S. 117, 120 (1991). Applicants, acknowledging that
the transaction
will have certain adverse consequences for employees, project (based on
calendar year 1996 data,
the last full year for which average monthly employment levels were available)
a net loss of
2,670 jobs, or 3.6% of the combined workforce. In addition, 2,323 jobs will be
transferred. Two
major unions, the United Transportation Union (UTU) and the Brotherhood of
Locomotive
Engineers (BLE), representing about 43% of the contract employees of the
affected railroads,
have entered settlement agreements with applicants, and support the
transaction.(196)

As DOT and Transportation-Communications International Union (TCU) note, the
majority of job losses will be from the ranks of non-operating crafts:
clerical employees (843),
carmen (338), and maintenance-of-way employees (405). It is unfortunate that
these job losses
may occur. The public interest analysis, however, requires this Board to weigh
the impact upon
carrier employees against the other public benefits that should result from the
transaction.
Having done so, we conclude that on balance the impact on these employees does
not require this
Board to deny approval of the transaction. This is particularly clear when our
mitigation of these
impacts with the labor protective conditions we are imposing is taken into
account.

Specifically, the basic framework for mitigating the labor impacts of rail
consolidations is
embodied in the New York Dock conditions, and other very similar
conditions imposed with
regards to various other aspects of the transaction.(197) They provide both substantive benefits for
affected employees (up to 6 years of full wages, moving allowances,
preferential hiring, and
other benefits) and procedures (negotiation, or, if necessary, arbitration) for
resolving disputes
regarding implementation of particular transactions. New York Dock, 360
I.C.C. at 84-90. We
may tailor employee protective conditions to the special circumstances of a
particular case. This
is done, however, only if it has been shown that unusual circumstances require
more stringent
protection than the level mandated in our usual conditions.

1. The Implementing Agreement Process. A number of parties have
raised questions
about the New York Dock implementing agreement process. Under New
York Dock, the
carriers and employees must arrive at an implementing agreement before a
transaction such as
this is carried out. If prompt agreement cannot be reached, these matters are
subject to binding
arbitration. As part of this process, collective bargaining agreement (CBA)
terms may be
modified as necessary to carry out a transaction in the public interest.
Norfolk & W. Ry. v.
American Train Dispatchers Ass'n, 499 U.S. 117 (1991).

DOT and several unions urge that our approval of this transaction not be
deemed to be
approval of all CBA modifications that are mentioned by applicants in their
application and
operating plans. These parties are concerned that, because numerous details of
applicants' plans
to restructure their CBAs with the various unions are included in the
application, approval of the
application will be deemed by arbitrators to amount to a finding that
restructuring the CBAs as
proposed is "necessary" to carry out the transaction. DOT asks that we make a
clear statement
that these issues are not prejudged to "ensure that traditional rights under
New York Dock will
not be eroded." The Allied Rail Unions (ARU)(198) and TCU have gone further, suggesting that
we make findings in this decision that the CBA changes described by applicants
are not deemed
by us to be necessary to carry out the transaction.

We adopt the approach suggested by DOT. In approving a rail merger or
consolidation
such as this, we have never made specific findings in the first instance
regarding any CBA
changes that might be necessary to carry out a transaction, and we will not do
so here. Those
details are best left to the process of negotiation and, if necessary,
arbitration under the New
York Dock procedures. For us to make determinations on those issues now
would be premature.
Railway Labor Exec. Ass'n v. ICC, 883 F.2d 1079 (D.C. Cir. 1989).(199) We will resolve them
only as a last resort, giving deference to the arbitrator. Specifically, this
means that our approval
of this transaction does not indicate approval or disapproval of any of the CBA
overrides that
applicants have argued are necessary to carry out the transaction; the
arbitrators are free to make
whatever findings and conclusions they deem appropriate with respect to CBA
overrides under
the law.

2. Request To Impose Pre-Implementation Labor Protection. ARU
filed a petition for
declaratory order requesting us to declare that the voting trust agreement used
by applicants was
a sham and that, as a consequence, CSX and NS were already in effective control
of Conrail. See
ARU-6 filed July 18, 1997. To remedy the situation, ARU requested that we
order divestiture of
Conrail stock or impose pre-authorization labor protective benefits on the
proposed transaction.
ARU's petition will be denied. Applicants' voting trust agreement conforms to
our regulations
as well as long-standing Board and ICC precedent recognizing that beneficial
ownership can be
separated from control by an appropriate voting trust instrument. SeeWater Transp. Ass'n. --
Petition for Declaratory Order -- American Commercial Lines Voting Trust,
367 I.C.C. 559,
567-58 (1983), aff'dsubnom. Water Transp. Ass'n v.
Interstate Commerce Commission, 715
F.2d 581 (D.C. Cir. 1983). In any event, it is unnecessary to impose labor
protection prior to our
approval of the transaction to protect employees from actions taken in
anticipation of our
approval because it is well settled that the labor protection that we impose
extends to such
matters.

3. Retiree Issues. Nine Conrail retirees have sought protection
of their rights under the
Conrail Supplemental Pension Plan, a matter that appears to be governed by
contract, and to have
little connection to our approval of this transaction. To the extent that this
plan could ultimately
be touched upon by implementing agreements relating to this transaction, we
note that vested
pension benefits have been determined by the ICC, with court approval, to be
included among
the "rights, privileges and benefits" protected by section I(2) of our
conditions from modification
under section I(4). United Transportation Union v. STB, 108 F.3d 1425
(D.C. Cir. 1997).

4. Requests To Expand New York Dock. TCU has argued that
we should expand the
New York Dock protections to provide "attrition protection" and that we
should waive the basic
requirement under New York Dock that employees must accept assignment at
a new location that
requires them to move their residence, or else forfeit their entitlement to
protection allowances.
DOT supports the latter request on the ground that this transaction, because of
its extremely
broad scope, requires certain employees to move unusually long distances.

TCU argues that attrition protection is justified by the fact that Conrail
TCU employees
have made sacrifices to build a strong and profitable Conrail. The Board
understands and
appreciates the sacrifices that rail labor has made throughout the period of
downsizing and
restructuring in the rail industry, and New York Dock was developed to
compensate employees
for those sacrifices. The ICC stated in Railroad Consolidation
Procedures, 363 I.C.C. at 793,
that, unless it can be shown that, because of unusual circumstances more
stringent protection is
necessary, it would provide the protections mandated by section 11347 (now
section 11326).
The ICC and the Board have consistently rejected requests to impose attrition
conditions in prior
merger cases.(200) Here, we will follow the
precedent already established.

TCU and DOT have not demonstrated that the basic protections of New York
Dock
should be altered so that an employee does not have to accept a job that
requires him or her to
move, or else forfeit the monetary payments. A basic part of the bargain
embodied in the
Washington Job Protection Agreement upon which the New York Dock
conditions are based is
that rail carriers are permitted to move employees around in order to achieve
the benefits of a
merger transaction in return for up to 6 years of income protection and various
other benefits,
such as retraining and moving allowances. Such displacements do result in
hardships for
employees whenever they are required to move their place of residence, whether
the move is a
relatively short one or a longer one. In either case, however, New York
Dock compensates the
employee for the cost of the move and provides for up to 6 years of income
protection. Labor's
proposal would alter the New York Dock conditions to provide that
monetary allowances are
paid to employees who are offered continued employment, but refuse to take
advantage of it, a
result not envisioned under the New York Dock conditions.

Issues relating to attrition protection and separation allowances should be
negotiated in
the implementing agreement process. TCU cited negotiations implementing the
BNSF and
UP/SP mergers, which resulted in separation allowances being provided to
its members. We
believe that those issues should again be resolved as part of the
implementation negotiation
process.

We wish to clarify, however, that under New York Dock, once an
employee has been
dismissed, that employee may not be required to report to a work station that
requires that
employee to move his or her place of residence or else suffer the loss of
dismissal payments.
Applicants may not accomplish that result by a transfer of seniority rosters
for clerical workers to
Jacksonville or other points that would require dismissed employees, upon
recall, to move their
place of residence or forfeit their dismissal payments.

5. Protection For Nonapplicant Employees. UTU has asked us to
extend labor
protection by applicants to the employees of a nonapplicant carrier, the
Delaware and Hudson
Railway Company (D&H), because NS will be operating over a former Conrail
line as to which
D&H has trackage rights. There is nothing unusual about this situation, as
lines over which other
railroads have trackage rights have frequently been transferred in ICC and STB
merger
proceedings. Moreover, there is no reason to believe that D&H employees
will have less work
where NS is the owner than they did where Conrail was the owner. At oral
argument, Mr. Nasca
for the New York UTU argued that we should impose labor protection for D&H
employees on
CSX and NS because the D&H interchanges with CSX and NS. That is not an
unusual situation
or one warranting labor protection either.

In numerous decisions, the ICC, the Board, and the courts have consistently
ruled that the
employees of a nonapplicant carrier, or a carrier not directly involved in a
transaction governed
by 49 U.S.C. 11323, are not entitled to labor protection under 49 U.S.C.
11326.(201) In sum, no
valid reason has been presented to depart from that consistent practice here.

6. Safety. ARU and the International Association of Machinists
and Aerospace Workers
(IAM) argue that the transaction should be denied because it cannot be
implemented safely.
These unions claim that the operating plans submitted by applicants cannot be
carried out safely
with the number of employees that the carriers plan to retain. As noted in
greater detail in the
environmental portion of this decision and as detailed in the Final
Environmental Impact
Statement (Final EIS) issued on May 22, 1998, the carriers have worked closely
with Federal
Railroad Administration (FRA), the agency responsible for enforcement of rail
safety
regulations, to prepare and submit detailed Safety Integration Plans (SIPs)
that have been
scrutinized by both FRA and by our Section of Environmental Analysis (SEA).
DOT notes:
"Applicants have addressed all of the safety concerns identified by FRA."
DOT-6 at 14. DOT
also states that "in our view safety is no longer an issue with which the Board
need be
concerned." DOT-6 at 12. SEA reached precisely the same conclusion in its
extremely thorough
DEIS. Finally, the Board, and FRA, with DOT's concurrence, have recently
entered a
Memorandum of Understanding for monitoring the safe implementation of this
transaction. In
light of the success of this cooperative effort between applicants and FRA, we
must reject rail
labor's safety arguments.

7. Labor-Management Task Forces. UTU has suggested that labor
and applicants form
task forces for the purpose of promoting labor-management dialogue concerning
implementation
and safety issues. We will direct applicants to go forward with this process.

DETAILS OF PUBLIC BENEFITS. The most important
public benefit resulting from
the transaction will be a substantial increase in competition by allowing both
CSX and NS to
serve where only Conrail served before. This will bring new competition to
shippers in such
markets as Southern New Jersey/ Philadelphia, Northern New Jersey, Detroit,
Ashtabula, and the
Monongahela coalfields. Applicants estimate that $700 million worth of traffic
per year will
receive new two-carrier competition. In addition, the expansion of the NS and
CSX systems will
enable them to provide more competitive single-line service over more direct
routes, to render
improved service, and to use equipment more efficiently.

These features of the transaction will improve operating efficiency, reduce
transit times
and terminal delays, and provide logistics savings associated with single-line
service that will
make these companies more competitive with trucking and should, within 4 years
of the
transaction, shift over $400 million worth of traffic each year from highways
to rail lines. Using
1995 data, applicants have demonstrated that they should be able to achieve
quantifiable public
benefits, including operating cost savings, logistics savings, avoided highway
maintenance costs,
and other public benefits, of approximately $1 billion annually within that
same period.

Other benefits include favorable safety and environmental consequences, and
the
improvement in the rail system in the Eastern United States that will result
from the substantial
additional investment that NS and CSX will make to take advantage of
opportunities available on
their newly restructured systems. These transportation benefits will also
assist in creating new
economic development opportunities and in helping industries served by the new
systems to be
more competitive in the global marketplace.

Quantifiable Public Benefits. As noted, applicants
project that the acquisition of
Conrail will yield almost $1 billion in quantifiable public benefits during a
normal year.(202) These
include $562.6 million in operating efficiencies and cost savings, $340.1
million in shipper
logistics savings and competitive pricing benefits, and $95.5 million in
highway maintenance
benefits resulting from fewer trucks being operated over public highways.

These benefits do not include an additional $445.4 million in private
benefits in terms of
anticipated revenue gains ($299.5 million for NS and $145.9 million for CSX)
from increased
traffic volume, but not from any projected rate increases. Revenue gains,
while a benefit to the
carriers, are not deemed to be a quantifiable public interest benefit.(203) They do undercut,
however, arguments raised by various parties that applicants will have to raise
their rates to pay
the acquisition price for the Conrail properties, as discussed earlier in this
decision. These
anticipated revenue gains have not been challenged.

Various parties, including several shortline railroads, shippers, and
municipalities, have
questioned the public benefits to be realized as a result of the acquisition.
While none of these
parties has presented alternative calculations or any detailed analysis,
several note that the recent
UP/SP merger has resulted in severe difficulties with the movement of
traffic in the West, and
this has resulted in significant hardship for many shippers, with few or no
benefits yet being
realized as a result of that merger. Applicants here have properly recognized
that benefits are not
all realized at once and have, in our opinion, developed realistic projections
showing that for the
first 2 years following the acquisition, there will be significantly fewer
benefits (or even
temporary losses) resulting from that acquisition. The long-range (i.e.,
normal year) figures,
however, show that, after the initial shake-out costs occur, the acquisition
should produce
substantial yearly public benefits.

Moreover, serious infrastructure deficiencies were a significant factor
related to the
problems in the West. UPRR took over an SP system with well known and serious
problems of
deferred maintenance and delayed capital improvements. Both UPRR and SP had
experienced
tremendous traffic growth over the last 10 years that was straining existing
capacity. In contrast,
as applicants note, they will be taking over a Conrail system that is in much
better condition than
was SP. The Conrail system also has a greater percentage of double track than
does any railroad
in the country. None of the carriers in the East has experienced the
remarkable traffic growth
that took place in the West. As discussed elsewhere in this decision,
applicants have, with the
assistance of FRA, prepared and submitted detailed operating plans that
demonstrate that they
should be able to operate without the safety and other problems recently
experienced by UPRR.

Applicants have already completed or are in the process of completing,
numerous
construction projects necessary to allow traffic to flow freely over their
newly structured
systems. This construction, together with applicants' firm commitment not to
attempt to
implement this transaction before they have in place appropriate labor
agreements and
information technology necessary to provide efficient and reliable service,
should ensure that the
UP/SP situation is not repeated. Additionally, operational monitoring
to be conducted by the
Conrail Transaction Council and by the Board will help ensure a smooth
transition.

Our findings concerning quantifiable benefits in a normal year and in the 3
years
immediately following the transaction are summarized in the following tables:

STB's Restatement of

Applicants' Projected Annual Efficiencies

and Cost Savings for Years 1-3

(in $ millions)

NS

CSX

Total

Year 1

Operating Benefits to Carriers

($105.7)

($264.0)

($369.7)

Shipper Logistics Benefits

27.6

166.0

$193.6

Competitive Pricing Benefits

24.6

0.0

$24.6

Highway Maintenance Benefits

13.7

50.0

$63.7

Total Benefits

($39.8)

($48.0)

($87.8)

Year 2

Operating Benefits to Carriers

($11.5)

$106.7

$95.2

Shipper Logistics Benefits

73.7

166.0

$239.7

Competitive Pricing Benefits

65.6

0.0

$65.6

Highway Maintenance Benefits

36.4

50.0

$86.4

Total Benefits

$164.2

$322.7

$486.9

Year 3

Operating Benefits to Carriers

$208.0

$283.1

$491.1

Shipper Logistics Benefits

92.1

166.0

$258.1

Competitive Pricing Benefits

82.0

0.0

$82.0

Highway Maintenance Benefits

45.5

50.0

$95.5

Total Benefits

$427.6

$499.1

$926.7

STB's Restatement of

Applicants' Projected Annual Efficiencies

and Cost Savings (Normal Year)

(in $ millions)

NS

CSX

Total

BENEFITS TO CARRIERS

Operating Savings

252.1

289.9

542.0

Capital Expenditure Savings

20.6

0.0

20.6

Subtotal (Benefits to Carriers)

272.7

289.9

562.6

OTHER BENEFITS

Shipper Logistics Benefits

92.1

166.0

258.1

Competitive Pricing Benefits

82.0

0.0

82.0

Highway Maintenance Benefits

45.5

50.0

95.5

Subtotal (Other benefits)

219.6

216.0

435.6

TOTAL PUBLIC BENEFITS

$492.3

$505.9

$998.2

Unquantifiable Benefits. The transaction will create
competitive railroad options at
many locations currently served only by Conrail. New rail-to-rail competition
will benefit
shippers in the South Jersey/Philadelphia, North Jersey, and Detroit SAAs, at
the Ashtabula
docks in Ohio, and in the Monongahela coal fields in Southwestern Pennsylvania
and Northern
West Virginia. Applicants have estimated that more than $700 million in annual
freight
movements that are now rail-served solely by Conrail at origin or destination
will now have two
independent and competitive alternatives.

The transaction will also increase competition between railroads and other
modes due to
the expansion of single-line service throughout the new NS and CSX systems.
CSX's traffic
studies project annual truck-to-rail diversions that will eliminate 438,000
truck trips per year, and
NS has predicted that its expanded operations will remove an additional 589,000
truck trips.
Together, applicants estimate that they will divert sufficient truck traffic to
remove a million
line-haul truck trips per year from our nation's highways.

The operating efficiency gains and diversion of traffic from highways to
rail lines will
yield substantial environmental benefits, as recognized in the Final EIS.
Trucks on average
require at least three times the amount of fuel as trains to move the same
amount of freight the
same distance. Therefore, the diversion of traffic from the highways will
reduce diesel fuel
consumption by 80 million gallons per year. This will materially improve air
quality.

The transaction should also yield safety benefits. Among all Class I
railroads, NS and
CSX had the lowest accident rates for the period 1994-1996. Although FRA noted
some
problems with the corporate safety culture of CSX in a report issued in October
of 1997, our
record shows that the problems mentioned in that report have now been
resolved. In response to
the concerns of FRA and others, we issued a decision in November of 1997
requiring each
applicant to provide us with a detailed Safety Implementation Plan (SIP).
Those SIPs were
prepared in conjunction with FRA, which now has approved these plans, and the
safety programs
for each applicant that they include. The SIPs were submitted to us in
December of 1997, and
have been examined by SEA in the Final EIS, as explained in detail later in the
decision. We
agree with SEA's and FRA's assessment that the SIPs adequately address safety
issues.

Achieving the lower accident rates of NS and CSX on the new lines would
significantly
reduce future rail accidents. Moreover, the diversion of traffic from motor
carriers to railroads
will reduce highway accidents and related personal injuries and loss of lives.
Because trucks
have more hazardous materials incidents per ton-mile of freight moved than do
railroads, the
diversion of hazardous materials from truck to rail will make the handling of
these materials
safer. Applicants' commitment to safety is reflected in their good safety
records and in the SIPs
they developed in close consultation with FRA.

The competitive benefits, operating efficiency gains, and environmental and
safety
benefits will be achieved with no significant adverse competitive effects. The
existing NS and
CSX systems connect largely end-to-end with the portions of Conrail that each
acquiring
applicant will operate. In those few areas where shippers' rail options would
have declined from
two to one, applicants' transaction agreement largely preserves two-carrier
service, through
trackage rights or other arrangements, and we have imposed additional
conditions that
appropriately address all remaining competitive issues. The benefits will also
be achieved with
minimal line abandonments, totaling only about 58 miles. These are lines with
little or no local
traffic and where overhead traffic can be routed more efficiently over other
lines.

These substantial public benefits from the transaction are largely
undisputed. While a
number of parties have claimed that the transaction will have various adverse
effects on them,
none has seriously challenged applicants' projections of public benefits or has
raised significant
questions about the overall competitive, environmental, and safety benefits to
be derived from
the transaction.

DETAILS OF FINANCIAL MATTERS. The evidence
demonstrates that, after
acquiring the Conrail properties, NS and CSX will remain financially sound,
that NS' and CSX's
assumption of the payment of Conrail's fixed charges will be consistent with
the public interest,
that the terms of the acquisition agreements and transactions are just and
reasonable, and that the
assumption by CSX and NS of the liabilities of Conrail will neither impair the
acquiring carriers'
ability to maintain viable plant investments and to provide service, nor force
them to raise rates
to captive shippers to finance the acquisition.

Financial Condition. We believe that, despite
expenditures of approximately $4.2
billion and $5.8 billion, by CSX and NS, respectively, for Conrail's stock,(204) the financial
condition of each of the acquiring companies should be favorable because
considerable gains in
earnings should result from increased revenues and cost savings attributable to
implementation of
the post-acquisition operating plans submitted by CSX and NS.

Applicants submitted pro forma financial statements showing consolidated
data for both
CSX and NS after acquisition of Conrail, for a base year using 1995 data and
for each of the first
3 years after completion of the acquisition. These statements reflect the
anticipated benefits that
will be achieved by each party from the acquisition and operation of Conrail's
assets and the
resulting changes in various revenue and expense accounts. Applicants also
submitted financial
statements for a "normal" year (a year after the third post-acquisition year)
depicting the total
benefits to be achieved from the acquisition and any normalized additional debt
and interest
expenses that will be incurred.

1. Financial Condition Of CSX. CSX expects the acquisition to
produce annual benefits
in a normal year, giving effect to full implementation of its operating plan,
of $435.8 million,
consisting of $289.9 million in operating efficiencies and cost savings and
$145.9 million in
operating revenue gains.(205) Net revenue
gains to CSX are expected to total $58.1 million in the
first year of the acquisition, growing to $108.4 million in the second year,
and reaching $145.9
million in the third year. After adjusting for various expenses incurred
during the first 3 years
that are associated with the acquisition, we have computed annual operating
benefits (from
revenue gains and operating efficiencies) for each of these years.(206)

Almost all (over 98%) of the
anticipated normalized annual operating benefits of $435.8 million are expected
to be realized by
the end of the third year following the acquisition.

Table 1 in Appendix P shows various financial data for CSX on a
post-acquisition basis.
These data include balance sheet and income statement figures from CSX's pro
forma financial
statements and selected financial ratios developed from these data. These data
incorporate the
base year (1995 data), each of the first 3 years after the acquisition, and a
normal year. We have
reached the following conclusions based on an analysis of these data.

The consolidated pro forma income before fixed charges exceed fixed charges
(interest
payments for long-term debt) by margins that gradually rise from a low of 2.9
times during the
first year after the acquisition to 3.4 times during the third year. The fixed
charge coverage for
the base year was 5.2 times, and for the normal year is projected to be 3.7
times. Thus, it would
appear that CSX, on a post-acquisition basis, will generate sufficient income
to cover payment of
fixed charges, including interest associated with all debt issued to purchase
Conrail stock plus
debt assumed in the transfer of Conrail's assets.

The pro forma cash throw-off-to-debt ratios, which measure the ability to
generate
sufficient cash flows from operations to repay long-term debt maturing during
the year, are
favorable. During the base year, cash flow from operations exceeded maturing
long-term debt by
3.4 times. The pro forma ratios show a steady improvement from 3.3 times
during the first year
to 3.6 times by the third year (and 3.7 for the normal year).

The operating ratio (the ratio of operating expenses to operating revenues)
for the
consolidated company is projected to improve (favorably decline) each year,
moving from 85.5%
during the base year to 83.7% for the third year and 83.5% for the normal
year. This signifies a
steady, gradual improvement in operating efficiency as a result of the
acquisition.

CSX's net income is projected to increase from $753 million during the
first year to $961
million for the normal year. Because a large portion of this net income is
being placed in
retained earnings, shareholders' equity is projected to increase by a higher
percentage than is net
income. This results in a decline in return on equity, despite the increase in
net income, from
15.4% for the first year to 13.7% for the normal year. The increase in net
income, coupled with
the increase in equity and repayment of long-term debt, results in the ratio of
long-term debt to
debt plus shareholders' equity being projected to improve from almost 60% in
the first year to
less than 46% by the normal year.

The pro forma data indicate that CSX, after acquisition of 42% of Conrail,
will possess
considerable financial strength. Furthermore, these results may be understated
because they do
not take into account other economic forces unrelated to the merger such as
growth in the overall
economy, which would have a positive impact. We conclude that the surviving
company will be
financially sound.

2. Financial Condition Of Norfolk Southern. NS expects the
acquisition to produce
annual benefits in a normal year, giving effect to full implementation of its
operating plan, of
$572.19 million, consisting of $272.67 million in operating efficiencies and
cost savings and
$299.52 million in operating revenue gains.(207) These amounts are higher than those
projected for
CSX, due largely to the fact that NS will operate approximately 58% of Conrail,
while CSX will
operate 42%. Net revenue gains to NS are expected to total $43.44 million in
the first year of the
acquisition, rising sharply to $226.41 million in the second year, and reaching
$299.6 million in
the third year. After adjusting for various expenses incurred during the first
3 years that are
associated with the acquisition, we have computed annual operating benefits
(from revenue gains
and operating efficiencies) for each of these years.(208)

Table 2 in Appendix P shows various financial data for NS on a
post-acquisition basis.
These data include balance sheet and income statement figures from NS' pro
forma financial
statements and selected financial ratios developed from these data. These data
incorporate the
base year (1995 data), each of the first 3 years after the acquisition, and a
normal year. We have
reached the following conclusions based on an analysis of these data.

The consolidated pro forma income before fixed charges exceed fixed charges
(interest
payments for long-term debt) by margins that slowly rise from a low of 2.9
times during the first
year after the acquisition to 3.8 times during the third year and 4.1 times for
a normal year. The
fixed charge coverage for the base year was 8.0 times (due to the fact that NS
had very little debt
prior to the acquisition). The pro forma fixed charge coverages are more than
adequate. Again,
as with CSX, it would appear that NS will generate sufficient income to cover
payment of fixed
charges, including interest associated with all debt issued to purchase Conrail
stock and debt
assumed in the transfer of Conrail's assets.

The pro forma cash throw-off-to-debt ratios, which measure the ability to
generate
sufficient cash flows from operations to repay long-term debt maturing during
the year, are
extremely favorable. During the base year, cash flow from operations exceeded
maturing long-term debt by 8.9 times. The pro forma ratios show a steady
improvement from 8.3 times during
the first year to 9.6 times by the third year (and 9.7 for the normal year).

The operating ratio for the consolidated company is projected to improve
(favorably
decline) each year, moving from 77.5% during the base year to 73.6% for the
third year, as well
as for the normal year. This signifies a steady, gradual improvement in
operating efficiency as a
result of the acquisition.

NS' net income is projected to increase from $746 million during the first
year to $1,038
million for the normal year. As is true for CSX, because a large portion of
this net income is
expected to be retained and not paid out as dividends, shareholders' equity is
projected to
increase by a higher percentage than is net income. This results in slightly
lower return on
equity, despite the increase in net income, from 14.0% for the first year to
13.8% for the normal
year. Again, as is true for CSX, NS' increase in net income, coupled with the
increase in equity
and repayment of long-term debt, results in the ratio of long-term debt to debt
plus shareholders'
equity being projected to improve from slightly over 61% in the first year to
48% by the normal
year.

The pro forma data indicate that NS, after acquisition of 58% of Conrail,
will possess
considerable financial strength. Furthermore, these results may be understated
because they do
not take into account economic factors extraneous to the merger such as growth
in the economy
as a whole and other positive financial impacts. We conclude that the
surviving company will be
financially sound.

Fixed Charges. We are required to consider the total
fixed charges resulting from the
acquisition, 49 U.S.C. 11324(b)(3), as well as any assumption of payment of
fixed charges and
any increase in fixed charges, 49 U.S.C. 11324(c). There will be significant
acquisition-related
increases in fixed charges for both NS and CSX due to the issuance of
additional debt and the
assumption of Conrail liabilities. As previously discussed, however, the
evidence demonstrates
that these increases will not undermine the financial soundness of either
carrier. The financial
soundness of the surviving entities supports a finding that the new fixed
charges that will result,
as well as CSX's and NS' assumption of Conrail's fixed charges, will be
consistent with the
public interest.

Fairness Determination. Section 11324(c) directs us to
approve any transaction referred
to in 49 U.S.C. 11323 when we find that the transaction is consistent with the
public interest. In
Schwabacher v. United States, 334 U.S. 182 (1948) (Schwabacher),
the Supreme Court held that
under its plenary authority to approve mergers, the ICC was required to
determine the value of
minority shares when shareholders are forced to surrender those shares in a
merger. The court's
decision in that case relied upon certain language in the statute requiring the
ICC to ensure that
various merger conditions are "just and reasonable." Although that particular
language was
removed from the statute in the 1978 recodification of the Interstate Commerce
Act, the
requirement of making a fairness determination, as interpreted in
Schwabacher, remains. The
recodification by its own clear statutory terms "may not be construed as making
a substantive
change in the laws replaced." Act of Oct. 17, 1978, section 3(a), Pub. L. No.
95-473, 92 Stat
1337, 1446.

Applicants' financial advisors, Wasserstein Perella &
Co., Inc. (for the CSX
shareholders), Merrill Lynch and J.P. Morgan (for the NS shareholders), and
Lazard Freres &
Co. LLC and Morgan Stanley & Co. (for the Conrail shareholders) used
various valuation
techniques to demonstrate the fairness of the terms of the stock purchase to
the respective
shareholders. All these investment firms rendered opinions that the
consideration paid by NS
and CSX was fair to their shareholders and to those of Conrail from a financial
point of view.
We find the arguments and conclusions of these investment firms, who have
substantial expertise
in the valuation of businesses and securities in connection with mergers and
acquisitions, to be
persuasive. The cash consideration payable for Conrail stock has been approved
by the
respective boards of directors and substantial majorities of stockholders of
all companies.

All factors considered, the unrebutted evidence submitted by applicants
supports a
finding that the terms of the acquisition agreement are just and reasonable to
all shareholders of
CSX, NS, and Conrail.

Trackage Rights Compensation Is Reasonable. Applicants
have entered into trackage
rights agreements providing CSX and NS the opportunity to operate over each
other's track for
through movements and to access certain shippers' facilities. These agreements
provide that the
tenant carrier (NS or CSX) will pay the landlord carrier (CSX or NS) trackage
rights
compensation of 29 cents per car-mile anywhere on their respective systems
where trackage
rights are proposed.

The only objection to applicants' proposal is by Indianapolis Power &
Light Company
(IP&L), which argues that a trackage rights fee of 16 cents per car-mile
(based on its assessment
of the relevant combined CSX/Conrail 1995 URCS costs) should be established for
NS when it
provides service to one of its plants.

We have examined the issue of trackage rights compensation as a general
matter and as it
relates specifically to IP&L, and find that the agreed upon level of
compensation will allow the
carriers receiving trackage rights to compete effectively, replacing
competition that would
otherwise be lost through this transaction, as contemplated by 49 U.S.C.
11324(c).

1. IP&L's Computation Of Relevant Costs Is Invalid. In SSW
Compensation,(209) we
determined that trackage rights fees should be based upon three component
costs: (1) the variable
costs to the landlord resulting from the tenant's use of the track;(210) (2) a portion of total annual
maintenance costs for the relevant rail properties based on a pro-rata usage of
those properties by
the landlord and the tenant; and (3) a return element on the value of relevant
rail properties used,
again based on a pro-rata usage.

Applicants note, however, that IP&L's calculations do not take into
account the total
costs of line-haul trackage rights as required in SSW Compensation.(211) Using IP&L witness
Crowley's method, with appropriate adjustments, and using combined CSX/Conrail
1995 URCS
cost, applicants restated the total costs for trackage right compensation to be
32.45 cents per car-mile. IP&L failed to include any of the variable costs
of operating trains over the trackage rights
segment, and it included only the variable portions of both total annual track
maintenance costs
and return on road property investment.(212)
In addition, IP&L failed to include all cost elements
associated with the return on road property investment in its calculations.(213) As we have
explained in detail before, the total cost associated with developing trackage
rights fees, not just
the variable cost portion, must be included to allow the owning railroad to
recover its total cost
for the line.(214) Otherwise, the owning
carrier would be placed at a competitive disadvantage.
Therefore, IP&L's proposal to limit the trackage rights fee to 16 cents per
car-mile must be
rejected as invalid.

2. The Trackage Rights Fees Are Reasonable As A General Matter.
Applicants do not
explain how they developed their agreed upon level of 29 cents per car-mile;
they note only that
the fee is based on existing trackage rights fees negotiated between NS and
CSX. We obtained a
similar result (of 29 cents) using the method employed by applicants in
restating IP&L's 16 cent
proposal and applying CSX's 1995 URCS total costs. Further, using the same
method, we
developed Conrail and NS costs of 46 cents and 40 cents per car-mile,
respectively.(215)

The broadly applicable trackage rights fee of 29 cents is consistent with
the relevant costs
of CSX, the lowest costs of the three railroads at 29 cents per car-mile. This
means that CSX
would pay no more to NS for operating over its lines than it currently costs to
operate over its
own lines, while NS would actually pay less for operating over CSX lines than
it costs to operate
over its own. Therefore, neither carrier would have a disincentive to operate
over the trackage
rights granted by the other carrier, since in no case would the trackage rights
compensation be
higher than the cost of using the carrier's own track.(216) Thus, we find that the trackage rights
compensation applicants have agreed to pay will permit each carrier to provide
effective
competition through trackage rights, replacing competition that would otherwise
be lost.

EMBRACED CASES AND RELATED MATTERS. We are
exempting or, where
appropriate, granting approval for transactions proposed in 37 proceedings
embraced in the
application. These related filings include 10 notices of exemption and 12
petitions for exemption
relating to construction projects; a notice of exemption for a joint relocation
project; a petition
for exemption for the transfer of a line; an application for control of
terminal railroads; 8 notices
of exemption for trackage rights; and authorization to abandon, or to
discontinue operations over,
four line segments. We are dismissing an exemption petition for control of a
terminal railroad on
the ground that the proposed transaction will not constitute control within the
meaning of 49
U.S.C. 11324(d).

Construction Projects. By decision served November 25,
1997, we exempted, subject
to certain specified environmental mitigation measures, the construction aspect
of the connection
tracks proposed in the related filings in STB Finance Docket No. 33388
(Sub-Nos. 1 through
7).(217) Operations over the connection
tracks involved in the related filings in Sub-Nos. 1 through
7 are addressed in the present decision. We are exempting applicants'
remaining construction
projects proposed in Sub-Nos. 8 through 22 because they are integral to the
competitive service
that CSX and NS will provide under the primary transaction, and because they
otherwise satisfy
our exemption criteria under 49 U.S.C. 10502 and 49 CFR 1150.36.(218)

Notices of Exemption. As noted, with respect to construction
projects, applicants filed 10
notices of exemption under the class exemption provided at 49 CFR 1150.36.(219) This class
exemption applies to proceedings under 49 U.S.C. 10901 involving the
construction and
operation of connecting lines of railroad within existing rail rights-of-way,
or on land owned by
connecting railroads.

No individual findings under 49 U.S.C. 10502 are necessary as to the
notices because the
exemption criteria have been met and thus the proposals fall within the class
exemption provided
at 49 CFR 1150.36. Applicants indicate that the construction and operations
covered by their
notices will not be implemented until after the effective date of this decision.

These exemptions are effective on August 22, 1998, unless stayed.
Petitions to stay the
effective date of any of these notices must be filed by July 31, 1998.
Petitions for
reconsideration must be filed by August 12, 1998. Environmental mitigating
conditions are
discussed elsewhere in this decision.

Petitions for Exemption. Because the remaining construction
projects do not qualify
under the class exemption, applicants filed 12 petitions for exemption.(220) Under 49 U.S.C.
10901(a), a rail line may not be constructed or operated without our prior
approval. Under 49
U.S.C. 10502, however, we must exempt a transaction from regulation when we
find that: (1)
application of the statutory provision is not necessary to carry out the rail
transportation policy of
49 U.S.C. 10101; and (2) either (a) the transaction is of limited scope, or (b)
the application of
the statutory provision is not needed to protect shippers from the abuse of
market power.

Detailed scrutiny is not necessary to carry out the rail transportation
policy. The
proposed exemptions will allow competition and the demand for services to
establish reasonable
rates for rail transportation, 49 U.S.C. 10101(1), will minimize the need for
regulatory control,
49 U.S.C. 10101(2), will ensure the development and continuation of a sound
rail transportation
system with effective competition among rail carriers, 49 U.S.C. 10101(4), and
will ensure
effective competition between rail carriers, 49 U.S.C. 10101(5); and other
aspects of the rail
transportation policy will not be adversely affected. Regulation is not
necessary to protect
shippers from the abuse of market power. The very purpose of the construction
projects is to
create additional competitive alternatives and to improve rail service for
shippers throughout
applicants' substantially expanded systems.

These exemptions are effective on August 22, 1998, unless stayed.
Petitions to stay the
effective date of any of these notices must be filed by July 31, 1998.
Petitions for
reconsideration must be filed by August 12, 1998. Environmental mitigating
conditions are
discussed elsewhere in this decision.

Trackage Rights (Notices of Exemption). Applicants filed
eight notices of exemption
under 49 CFR 1180.2(d)(7) regarding the acquisition of trackage rights.(221) Our pertinent class
exemption exempts the acquisition of trackage rights by a rail carrier over
lines owned or
operated by any other rail carrier that are: (i) based on written agreements;
and (ii) not filed or
sought in responsive applications in rail consolidation proceedings.

No individual findings under 49 U.S.C. 10502 are necessary as to the
trackage rights
notices because the transactions fall within the class exemption provided at 49
CFR 1180.2(d)(7).
Applicants state that their exemption notices meet these criteria and that the
acquisitions will not
be implemented until after the effective date of this decision. The effective
date of these notices
is August 22, 1998. Labor conditions are discussed elsewhere in this decision.

Joint Relocation Project. In STB Finance Docket No. 33388
(Sub-No. 23), NW filed a
notice of exemption under 49 CFR 1180.2(d)(5) regarding a joint project
involving relocation of
NW's rail line running down 19th Street in Erie, PA (a distance of
approximately 6.1 miles), to a
parallel railroad right-of-way owned and operated by CRC that will be allocated
to CSXT under
applicants' transaction agreement. NW's joint proposal involves the relocation
of a line of
railroad which does not disrupt service to shippers. It therefore complies
with 49 CFR
1180.2(d)(5). Because the project is contingent upon approval of the primary
application, it will
not be implemented until after the effective date of our decision here.

Line Transfer. We are exempting, in the STB Finance
Docket No. 33388 Sub-No. 24
docket, the acquisition by CRC of NW's Fort Wayne Line. CRC and NW state in
their petition
that this line transfer will not be effected until immediately prior to Day One
of the CSX/NS/CR
transaction, when the Fort Wayne Line will be allocated to CSX. This line sale
would ordinarily
require approval under 49 U.S.C. 11323-25; but, under 49 U.S.C. 10502, we must
exempt a
transaction from regulation when we find that: (1) application of the
statutory provision is not
necessary to carry out the rail transportation policy of 49 U.S.C. 10101; and
(2) either (a) the
transaction is of limited scope, or (b) the application of the statutory
provision is not needed to
protect shippers from the abuse of market power. Detailed scrutiny is not
necessary to carry out
the rail transportation policy. The proposed exemption will minimize the need
for regulatory
control, 49 U.S.C. 10101(2), will ensure the development and continuation of a
sound rail
transportation system with effective competition among rail carriers, 49 U.S.C.
10101(4), and
will ensure effective competition between rail carriers, 49 U.S.C. 10101(5);
and other aspects of
the rail transportation policy will not be adversely affected. Regulation is
also not necessary to
protect shippers from the abuse of market power. No shipper will lose service
as a result of the
transfer. The purpose of the transfer is to effect a like-kind exchange of
rail routes in accordance
with applicants' transaction agreement. Labor conditions are discussed
elsewhere in this
decision.

Terminal Railroad Control Transaction.

Application. We are granting the application in STB Finance
Docket No. 33388 (Sub-No. 26) where CSXC, CSXT, and The Lakefront Dock and
Railroad Terminal Company
(LD&RT) seek approval under 49 U.S.C. 11323-25 for the acquisition and
exercise by CSXC
and CSXT of control of LD&RT, and the common control of LD&RT and CSXT
and the other
rail carriers controlled by CSXT and/or CSXC. LD&RT, a Class III railroad
in which CSXT and
CRC each currently owns a 50% voting stock interest, operates approximately 17
miles of yard
tracks at Oregon, OH.

The LD&RT control transactions are minor transactions under 49 CFR
1180.2. LD&RT
provides facilities for the transfer of iron ore pellets from lake vessels to
rail cars. LD&RT does
not have any employees; its operations are performed entirely by CSXT employees
and, to a
limited extent, CRC employees. Control and operation of LD&RT by CSXT will
not have
regional or national transportation significance because CSXT is already
responsible for all of
LD&RT's business and there will be no significant changes in carrier
operations.

The LD&RT control transactions are directly related to the CSX/NS/CR
transaction that,
subject to conditions, we have found will offer substantial competitive
benefits. Approval of the
primary transaction will permit CSXT to offer more competitive service,
including the use of
LD&RT's facilities. The applicants in the Sub-No. 26 proceeding have shown
that the LD&RT
control transactions will not have any adverse effect on competition among rail
carriers or with
other modes, nor will the transactions cause any lessening of competition or
create any monopoly
or restraint of trade. Accordingly, the criteria in 49 U.S.C. 11324(d) have
been met. Labor
conditions are discussed elsewhere in this decision.

Petition for Exemption. We are dismissing the exemption
proceeding in STB Finance
Docket No. 33388 (Sub-No. 31) because the acquisition by CSXC and CSXT of a 50%
interest
in Albany Port Railroad Corporation (APR) will not enable CSXC and CSXT to
control APR
within the meaning of 49 U.S.C. 11323-25. SeeBurlington Northern,
Inc. -- Control & Merger,
366 I.C.C. 862, 866 (1983), aff'd sub nom.Brotherhood of Ry. &
Airline Clerks v. Burlington
Northern, Inc., 722 F.2d 380 (8th Cir. 1989). APR, which operates
approximately 16.5 miles of
track at the Port of Albany, NY, is owned in equal 50% shares by CRC and
Delaware and
Hudson Railway Company, Inc. (D&H), an affiliate of Canadian Pacific
Railway Company. If
the primary application is approved, CRC's 50% interest in APR will be
allocated to CSXT.
Currently, CRC and D&H each has two representatives on a four-member board
of directors.
Neither owner alone can control that board or APR's operations.(222) APR operates in the interest
of both of its owners. Petitioners state that the proposed control of CRC and
allocation of CRC's
interest to CSXT will not affect APR's operations. D&H will continue to
participate in APR's
management, and D&H's ability to obtain service from APR on a neutral and
impartial basis will
not be impaired.

Abandonments And Discontinuances. Applicants have filed a
petition for exemption
under 49 U.S.C. 10502 and three notices of exemption under 49 CFR 1152.50 to
abandon, or in
one proceeding, to discontinue operations over, four line segments that total
58.2 miles of track
in Illinois, Indiana, and Ohio. Public notice was properly given and, in
Decision No. 12, served
July 23, 1997, and published that day in the FederalRegister at 62 FR 39577, we accepted the
abandonment and discontinuance requests for consideration. Because the
abandonment
proposals were conditioned on consummation of the primary transaction, we
stated in Decision
No. 12 that the abandonment requests would be processed in accordance with the
overall
procedural schedule, rather than the deadlines established in section 10904 and
in our regulations
governing abandonments. Decision No. 12, slip op. at 21. The record is now
complete and we
will consider the merits of each proposal under the applicable standards.
Labor and
environmental conditions are discussed elsewhere in the decision.

Notices of Exemption. As noted, applicants have filed three
abandonment or
discontinuance notices of exemption(223) under
49 CFR 1152 Subpart F. The notices seek to
invoke the 2-year out-of-service class exemption codified at 49 CFR 1152.50,
pursuant to which
an abandonment or discontinuance of service or trackage rights is exempt if the
carrier certifies
that no local traffic has moved over the line for at least 2 years, that any
overhead traffic on the
line can be rerouted over other lines, and that no formal complaint filed by a
user of rail service
on the line (or a state or local government entity acting on behalf of such
user) regarding
cessation of service over the line either is pending with the Board or any U.S.
District Court or
has been decided in favor of the complainant within the 2-year period.

No individual findings under 49 U.S.C. 10502 are necessary as to the three
notices
because these lines fall within the class of lines exempted by 49 CFR 1152
Subpart F.
According to applicants, there has been no local traffic on the lines for 2
years and any overhead
traffic on the line can be rerouted over other lines.

These exemptions will be effective on Day One (unless stayed pending
reconsideration).
Petitions to stay and formal expressions of intent to file an offer of
financial assistance under 49
CFR 1152.27(c)(2) must be filed by July 31, 1998, and petitions to reopen must
be filed by
August 12, 1998.

Petition for Exemption. As noted, NW filed a petition for
exemption in STB Docket No.
AB-290 (Sub-No. 196X) to abandon a 7.5-mile line between Toledo and Maumee,
OH.(224) Under
49 U.S.C. 10903-05, a rail line may not be abandoned without prior approval.
Under 49 U.S.C.
10502, however, we must exempt a transaction from regulation when we find
that: (1)
application of the statutory abandonment provisions is not necessary to carry
out the rail
transportation policy of 49 U.S.C. 10101; and (2) either (a) the particular
abandonment or
discontinuance is of limited scope, or (b) the application of the statutory
abandonment provisions
is not needed to protect shippers from the abuse of market power.

Detailed scrutiny is not necessary to carry out the rail transportation
policy. By
minimizing the administrative expense of filing an abandonment application, the
exemption will
expedite regulatory decisions and reduce regulatory barriers to exit. 49
U.S.C. 10101(2) and (7).
By allowing NW to avoid the expense of retaining and maintaining the
Toledo-Maumee line that
generates marginal traffic and to apply the assets more productively elsewhere
on the system, the
exemption will foster sound economic conditions and encourage efficient
management. 49
U.S.C. 10101(3), (5), and (10). Other aspects of the rail transportation
policy are not affected
adversely.

Regulation is not necessary to protect shippers from an abuse of market
power because all
overhead traffic will be rerouted to more efficient former Conrail lines, and
local traffic will have
viable alternative transportation available. No shipper opposes the
abandonment petition.

Given our findings regarding the probable effect of the transaction on
market power, we
need not determine whether the transaction is of limited scope. Nevertheless,
we note that the
proposed abandonment involves only 7.5 miles of rail line in a single state
with little local traffic.

This exemption will be effective on Day One (unless stayed pending
reconsideration).
Petitions to stay and formal expressions of intent to file an offer of
financial assistance under 49
CFR 1152.27(c)(1) must be filed by July 31, 1998, and petitions to reopen must
be filed by
August 12, 1998.

Trail Use And Public Use Conditions.

Trail Use. The City of Georgetown, IL (City), requests issuance
of a notice of interim
trail use (NITU) under the National Trails System Act, 16 U.S.C. 1247(d)
(Trails Act), with
respect to the Paris-Danville abandonment in STB Docket Nos. AB-167 (Sub-No.
1181X) and
AB-55 (Sub-No. 551X). The City has submitted a statement of willingness to
assume financial
responsibility for the rights-of-way and acknowledged that use of the
rights-of-way are subject to
future reactivation for rail service in compliance with 49 CFR 1152.29. CSX
and Conrail have
indicated their willingness to negotiate trail use agreements. See
CSX/NS-176 at 801.

Because the City's request complies with the requirements of 49 CFR 1152.29
and
applicants are willing to enter into negotiations, a NITU will be issued in the
STB Docket Nos.
AB-167 (Sub-No. 1181X) and AB-55 (Sub-No. 551X) proceeding as part of this
decision. The
parties may negotiate an agreement during the prescribed 180-day period, as
discussed further
below. If the parties reach a mutually acceptable final agreement, no further
Board action is
necessary. If no agreement is reached within 180 days, applicants may fully
abandon the line.
Use of the right-of-way for trail purposes is subject to restoration for
railroad purposes. See 49
CFR 1152.29(d)(2).

The parties should note that operation of the trail use procedures could be
delayed, or
even foreclosed, by the financial assistance process under 49 U.S.C. 10904. As
stated in Rail
Abandonments -- Use of Rights-of-Way as Trails, 2 I.C.C.2d 591, 608 (1986)
(Trails), offers of
financial assistance (OFA) to acquire rail lines for continued rail service or
to subsidize rail
operations take priority over interim trail use/rail banking and public use.
Accordingly, if an
OFA is timely filed under 49 U.S.C. 1152.27(c)(1), the effective date of this
proceeding may be
postponed beyond the effective date indicated here. See 49 CFR
1152.27(e)(2). In addition, the
effective date may be further postponed at later stages in the OFA process.
See 49 CFR
1152.27(f). Finally, if the line is sold under the OFA procedures, the notice
of exemption will be
dismissed and trail use precluded. Alternatively, if a sale under the OFA
procedures does not
occur, trail use may proceed.

Public Use. The City also seeks a public use condition under 49
U.S.C. 10905 with
respect to the Paris-Danville abandonment. The St. Joseph County Parks and
Recreation
Department (Department) seeks a similar condition with respect to NW's notice
of exemption in
STB Docket No. AB-290 (Sub-No. 194X).(225)
They have met the criteria for imposing a public
use condition by specifying: (1) the condition sought; (2) the public
importance of the condition;
(3) the period of time for which the condition would be effective; and (4)
justification for the
time period. 49 CFR 1152.28(a)(2). Accordingly, 180-day public use conditions
will be
imposed in STB Docket Nos. AB-167 (Sub-No. 1181X) and AB-55 (Sub-No. 551X), and
in STB
Docket No. AB-290 (Sub-No. 194X).

In issuing the NITU and imposing the public use conditions, we will follow
our usual
practice and have the 180-day Trails Act period run from the service date of
the decision, while
the public use condition will run from the effective date of the decision.(226)

Persons may file for both trail use and public use conditions. If a trail
use agreement is
reached on a portion of the right-of-way, applicants must keep the remaining
right-of-way intact
for the remainder of the 180-day period to permit public use negotiations.
Also, we note that a
public use condition is not imposed for the benefit of any one potential
purchaser, but rather to
provide an opportunity for any interested person to acquire a right-of-way that
has been found
suitable for public purposes, including trail use. Therefore, with respect to
the public use
condition, applicants are not required to deal exclusively with parties who
have filed requests,
but may engage in negotiations with other interested persons. Additional
public use requests are
unnecessary where the full 180-day period has been imposed.

ENVIRONMENTAL MATTERS. The National
Environmental Policy Act (NEPA)
requires that we take environmental considerations into account in our
decisionmaking. We must
consider significant potential beneficial and adverse environmental impacts in
deciding whether
to approve the transaction as proposed, deny the proposal, or grant it with
conditions, including
environmental conditions.(227) Accordingly,
SEA has conducted a detailed review evaluating the
potential environmental impacts of this transaction. SEA has prepared an
Environmental Impact
Statement (EIS)(228) addressing a broad range
of environmental issues and has obtained extensive
public input.

Based on its review, SEA recommended that we impose 65 environmental
conditions to
reduce or eliminate potential environmental impacts of the transaction. We
have thoroughly
reviewed the EIS and, as discussed below, we concur in SEA's analysis and
recommendations
and will impose SEA's recommended conditions with only minor modifications.(229) Our final
environmental conditions are attached at Appendix Q.(230) We will continue appropriate
monitoring of these environmental conditions until the end of our overall
oversight of the
transaction.

Overview Of The Environmental Review Process. After
issuing a notice of intent to
prepare an EIS, SEA proposed, and sought comments on, a draft scope for the
EIS. SEA then
published a final scope. The Draft EIS issued in December 1997 included an
analysis of the
potential environmental impacts of the transaction on particular communities
and regions. SEA
also made preliminary recommendations for local, as well as regional or general
(system-wide)
mitigation. The Draft EIS was widely distributed to interested parties,
including communities,
elected officials, and appropriate state and local agencies and organizations.

The public was encouraged to raise environmental concerns with SEA, or to
request
information about the proposal, throughout the environmental review process.
In addition, SEA
provided 45 days for comments on the Draft EIS and an additional 45 days for
comments
concerning refined hazardous materials, noise, and environmental justice data.
More than 250
comments were received from federal, state, and local agencies, communities,
elected officials,
businesses, associations, commuter services, and the general public, raising
over 1000 different
issues.

In preparing its Final EIS, SEA conducted further analysis (which included
site visits to
affected communities), reviewed all the public comments, and consulted with
federal, state, and
local agencies. As a result, SEA changed a number of the recommendations of
the Draft EIS to
reflect the concerns of the commentors and to update and refine the information
in the Draft EIS.
The Final EIS was issued on May 22, 1998, prior to the oral argument, at which
we heard the
viewpoints of interested parties on all issues, including environmental
issues.(231)

Finally, in the Final EIS, SEA analyzed the effects of NS' proposed
Cloggsville
alternative routing of up to 11 trains per day away from East Cleveland and the
West Shore
suburbs of Cleveland, which NS offered as a method to mitigate environmental
concerns a month
before the Final EIS was issued. SEA also recommended mitigation in the Final
EIS to address
significant environmental impacts of this proposed routing change.
Nevertheless, SEA provided
an additional comment period ending June 28, 1998, for those affected by that
proposed
rerouting. SEA invited interested persons to bring their concerns to our
attention by then, or
alternatively through an administrative appeal of this decision.(232)

Environmental Impacts. In the EIS, SEA considered a broad
range of environmental
issues potentially affecting a large number of communities on a general (or
system-wide),
regional, and local level. SEA focused on the potential environmental impacts
resulting from
changes in activity levels on existing lines and rail facilities. SEA also
examined the potential
environmental impacts from related construction and abandonment activities.
Our general
practice has been to mitigate only impacts resulting directly from a proposed
transaction, and not
to require mitigation for existing conditions and existing railroad operations.

We concur in SEA's analysis that, on a system-wide basis, the transaction
will bring
important environmental benefits resulting from overall improvements and
operating
efficiencies, without significant adverse environmental impacts.(233) As SEA explained, on a
regional basis and a local or site-specific basis, the transaction will result
in both benefits and
potential significant adverse environmental impacts resulting from shifts in
rail activity as the rail
carriers take advantage of the reconfigured rail system. For many regions and
communities, this
shift will reduce rail traffic along certain rail lines and activities at
certain rail yards and
intermodal facilities and result in environmental benefits.(234) But for others, the shift will increase
rail activity, which could cause potential significant adverse effects.(235) These potential impacts
include safety impacts related to hazardous materials transport and freight and
passenger
operations along certain rail corridors. Additionally, as SEA concluded, the
transaction will
result in community and local impacts related to noise, highway/rail at-grade
crossing safety and
delay, and emergency response vehicle delay, among others.(236)

Finally, as SEA determined, there are potential environmental impacts that,
unless
mitigated as applicants have agreed to do, would be disproportionately high and
adverse for
minority and low-income populations in certain cities.

Negotiated Agreements. During the environmental review
process, applicants consulted
with certain affected communities and negotiated a number of mutually
acceptable agreements
with local governments and organizations, addressing specific local
environmental concerns.(237)
SEA has reviewed these agreements and recommends that we impose them as
conditions, and we
will do so.(238) Also, applicants proposed
voluntary mitigation options addressing environmental
concerns of affected communities, which SEA considered in developing final
mitigation
recommendations in the Final EIS.(239) We
encourage the railroads and communities to negotiate
private solutions to environmental issues. Generally, these agreements are
more effective, and in
some cases, more far-reaching, than environmental mitigation options we could
impose
unilaterally.

Therefore, even if agreements are reached after SEA has made, and we have
adopted,
"final" environmental mitigation recommendations, agreements will be deemed to
be an
acceptable alternative to the specific local mitigation for a particular
community that we have
imposed.(240) Thus, we have modified SEA's
recommended environmental conditions to eliminate
the site-specific and other local mitigation for communities where applicants
have reached
agreements following issuance of the Final EIS (See Appendix Q).(241) Moreover, to give effect to
privately negotiated solutions whenever possible, we clarify that negotiated
agreements will
remain available as an alternative to the local and site-specific mitigation
imposed here (for
example, specific grade crossing upgrade mitigation, real time monitoring for
emergency
response delay, or noise mitigation).(242)

Environmental Mitigation. For the communities that could
not reach agreement, SEA
has recommended reasonable, feasible environmental mitigation conditions
addressing potential
significant adverse impacts of the acquisition-related increase in rail traffic
at multiple levels
(general, regional, and local). Most of these address railroad operating
safety concerns, such as
hazardous materials transport, and the interaction between rail passenger and
freight operations.

Additionally, for the first time, we are imposing conditions relating to
safety integration
issues resulting from combining these railroads. Our conditions also address
community
impacts, such as noise and highway/rail at-grade crossing safety, for those
communities that
would be most affected by the transaction. We have also addressed potential
disproportionate
impacts on minority and low-income populations. With the recommended
mitigation, we believe
the transaction will not have, and cannot be viewed as having, a
disproportionately high and
adverse impact on minority and low-income areas.

Many of our conditions extend to a number of states, while others are
specific to
individual communities and local needs. They would affect numerous communities
in 19 states
and the District of Columbia. With the exception of the Cloggsville
alternative routing of train
traffic in the Greater Cleveland area that NS itself developed and submitted to
us, none of our
conditions requires any change in applicants' operating plans.

Safety. As previously noted, more than half of our
environmental conditions address
safety concerns. For example, for certain rail line segments that would face a
significant increase
in movement of hazardous materials, applicants will be required to implement
various measures
such as installing train defect detectors, developing and distributing local
hazardous material
emergency response plans, conducting required train inspections, and conducting
simulated
emergency response drills with local emergency response organizations. To
address the
increased safety risks at hundreds of highway/rail at-grade crossings resulting
from transaction-related train increases, applicants will be required to
install notification signs warning motorists
about an imminent increase in the number of trains over that crossing, and to
install upgraded
warning devices, such as flashing lights or gates at particular crossings. To
mitigate the potential
safety risk from increased freight operations on appropriate rail line
segments, applicants will be
required to inspect the tracks on a usage basis rather than annually. To
provide for safer
passenger rail operations on certain rail line segments, CSX must consult with
three passenger
service agencies (Amtrak, VRE, and Maryland's commuter rail service (MARC)) to
develop
operational strategies and apply technology improvements to ensure that the
safety of passenger
train operations is maintained.(243)

Other Community Mitigation. Our conditions also address
other local concerns,
including noise, emergency vehicle response delay, cultural resources, and
natural resources
conditions for those communities that would be most affected by the transaction
and could not
negotiate an agreement. To address these concerns, SEA recommended, and we
have imposed,
measures such as building sound insulation or noise barriers, real-time train
location monitors,
and requiring best management practices.

For a limited number of locations with identified significant adverse
environmental
impacts, mitigation conditions are not reasonable or feasible. Therefore, even
with all the
recommended mitigation, there may be significant adverse environmental impacts
in certain
communities. But these effects are by no means so severe that they warrant
denying the
application, which has many beneficial transportation and environmental
impacts, and furthers
the public interest.

Safety Integration. As noted previously, we have
considered safety integration issues
here for the first time in a major consolidation. At the suggestion of FRA and
rail labor interests,
we required applicants to file detailed Safety Integration Plans (SIPs).(244) We have entered into a
Memorandum of Understanding (MOU) with FRA, to establish an ongoing monitoring
process
during implementation of the transaction, in which DOT has concurred. The MOU
clarifies the
actions that FRA and the Board will take to ensure the successful
implementation of the SIPs.
Under the terms of that MOU, FRA will monitor, evaluate, and review applicants'
progress until
FRA advises us in writing that the proposed integration is complete.(245) In short, we have given
safety unprecedented consideration in addressing the transaction, and the SIPs
will be monitored
until the transaction has been safely implemented.

EPA Comments. We have received a written comment from the
United States
Environmental Protection Agency (EPA) concerning the Final EIS. EPA raises
concerns about
air quality, noise, environmental justice, and wetlands that we will address
here.

1. EPA concurs with SEA's view that the air quality impacts of the
transaction will be
insignificant. Specifically, EPA agrees with SEA's analysis that the increase
in nitrogen oxide
emissions resulting from the increase in train traffic will be mitigated by a
reduction in truck
traffic and the use of new equipment meeting EPA's new locomotive emission
standards. It
disagrees, however, with SEA's position that the Clean Air Act General
Conformity Rules (40
CFR 93, Subpart B) do not apply to this transaction. Nevertheless, EPA
concludes that the issue
of applicability is moot, since there are no significant air quality impacts.(246) EPA states: "Since
the STB predicts an overall [nitrogen oxide] emissions reduction . . . we
believe that they have
met the de minimis test for the general conformity regulations and, thus, a
determination is not
necessary."(247) We continue to agree with
SEA on this issue, and in any event the issue need not
be considered further since, as EPA acknowledges, the adverse air impacts of
this transaction are
de minimis.(248)

2. EPA suggests that the level SEA established for mitigation of noise
impacts (70
decibel (dBA) with an increase of at least 5 dBA) is inconsistent with levels
that have been used
by some other federal agencies (65 or 67 dBA). EPA also notes that, in
determining where
mitigation is warranted, SEA may not have understood that smaller numerical
decibel increases
in noise at higher existing levels generally have more impact. Thus, EPA
suggests that SEA did
not adequately disclose to the public the severity of the noise impacts that
would be incurred
from increased train traffic.

We believe that the level SEA established for requiring mitigation of noise
impacts in this
case is reasonable and appropriate, given the magnitude of this project, the
fact that we are
addressing impacts of increased traffic over existing rail line segments, and
the estimated half-billion dollar cost of applying a mitigation standard of,
for example, 65 dBA with an increase of
3 dBA. As the Draft EIS and Final EIS show, SEA recognized that other agencies
have
implemented different noise mitigation criteria. Nonetheless, we agree with
SEA that using
similar mitigation criteria for this transaction could have substantially
increased the number of
mitigation sites in a project of such broad geographic scope, and thus would
have placed an
unrealistic and unreasonable burden on applicants. Moreover, contrary to EPA's
claim, SEA's
environmental documentation adequately disclosed the severity of potential
noise impacts. The
Final EIS made it clear to us and to the public that, even with SEA's
recommended noise
mitigation, a number of locations would experience adverse noise impacts above
our threshold
for noise analysis (65 dBA with an increase of at least 3 dBA) and below the
level for mitigation
(70 dBA with an increase of 5 dBA). In short, SEA's approach to noise
mitigation is reasonable
and appropriate for this transaction.

3. EPA raises concerns that some minority and low-income populations may
have been
excluded from mitigation because of SEA's methods of statistical analysis to
determine
disproportionate impacts for environmental justice populations.(249) We disagree. As explained in
the Final EIS, SEA did an extensive and reasonable statistical analysis to
identify environmental
justice populations that could experience high and adverse impacts, regardless
of whether the
impacts would be disproportionate. To inform and involve these environmental
justice
populations in the environmental review process, SEA conducted an extensive
public outreach
effort. Even if another statistical approach had been used, all of the
potential environmental
justice populations had the opportunity to participate in the environmental
review and
development of mitigation. Furthermore, our final mitigation addresses those
communities
(including environmental justice populations) that would experience significant
potential
environmental impacts.(250) Therefore, SEA's
analysis of potential impacts on environmental
justice populations was fully adequate and provided full opportunities for
minority and low-income populations to participate. Moreover, the recommended
mitigation we are imposing
adequately mitigates the impacts on those populations.

4. Finally, EPA raises concerns about SEA's documentation of wetlands
losses for
construction and abandonment activities in Illinois, Indiana, and Ohio. The
Draft EIS and the
Final EIS, however, sufficiently document potential impacts to wetlands,
including graphic
representation of the approximate location of wetlands. SEA also conducted
site visits to each
construction and abandonment site to assess and verify the location of
wetlands. (See Appendix I
of Draft EIS and Appendix L of the Final EIS.) To ensure protection of
wetlands and water
resources, we are imposing an environmental condition (No. 45) requiring
applicants to obtain all
necessary federal, state, and local permits related to alteration of wetlands,
which would include
an exact determination of wetlands impacts, with appropriate mitigation, as
required for a permit
under Section 404 of the Clean Water Act.(251)

Subsequent Developments. As noted, in developing final
environmental conditions, we
have made minor changes to SEA's recommended mitigation, primarily to reflect
the new
negotiated agreements with the Cities of Cleveland and Berea, requests for
clarification of certain
environmental conditions by applicants and others, and some requests for
additional conditions.
We will briefly discuss the changes we have made.(252)

Specifically, the Ohio Department of Transportation (Ohio DOT) requests
that we
provide a 120-day period for negotiations with applicants on 29 highway/rail
at-grade crossing
upgrades based on a corridor approach. We find this request reasonable and
consistent with our
intent to allow flexibility for applicants to work with states and local
communities to develop
mutually acceptable alternative safety mitigation. Therefore, an appropriate
condition has been
imposed. In addition, we encourage other states to continue to negotiate with
applicants on
crossing warning device issues during the 2-year time frame we have allowed for
installation of
these devices.

Applicants request clarification of SEA's recommended noise mitigation. In
response,
we have modified SEA's recommended noise condition to clarify that we do not
necessarily
prefer sound barriers to other noise mitigation measures. Rather, the noise
mitigation condition
is intended to establish a performance standard giving applicants flexibility
to work with
communities to achieve noise reduction through any mutually agreeable means.(253) The goal is a
reduction of 10 dBA, with a minimum of at least a 5 dBA reduction.

In response to applicants' request for clarification of SEA's recommended
condition
requiring signs with toll-free numbers and crossing identification numbers
(Condition 1(A)), our
condition clarifies that applicants will have 3 months from Day One to
implement it. Applicants
raised a number of logistical concerns about implementing this condition by Day
One, and thus
we are permitting more time to complete this important effort.

Our condition concerning advisory signs to address crossing safety
(Condition 1(B))
clarifies that (1) the format and lettering of temporary signs advising of
upcoming increased
traffic should comply with the Federal Highway Administration's Manual on
Uniform Traffic
Control Devices, and (2) the signs should be placed on railroad property, and
thus should not
require approval from state or local agencies.(254)

Applicants request that they be allowed to negotiate alternative crossing
protection with
relevant state departments of transportation and communities. We reiterate
that negotiated
agreements are always acceptable as alternatives to our environmental
conditions.

With respect to a request that we direct applicants to consult with
Wellington and North
Ridgeville, OH, regarding their environmental concerns, we will require
applicants to do so and
report back to us on these negotiations within 6 months of the effective date
of this decision.

SEA's proposed cultural and historic resource condition regarding the 75th
Street
Interlocking in Chicago has been refined to reflect an agreement with the
Illinois State Historic
Preservation Officer (SHPO) regarding procedures for completion of consultation
with the
SHPO.

Finally, CSX filed an engineering report addressing certain environmental
conditions.
The Four Cities responded to those requests that would affect operations in the
Four Cities area
and sought certain additional environmental conditions. We have granted in
part CSX's request
that we clarify SEA's recommended Condition 38(C) because of concerns about
engineering and
operational feasibility. Our Condition 26(C) provides CSX limited flexibility
in locating train
defect detection devices for one CSX rail line segment in the Greater Cleveland
Area, which will
in no way affect the level of protection afforded by this condition. All other
changes requested
by CSX are requests for modification, not clarification, including the ones
that would affect the
Four Cities. If CSX desires to pursue these requests, it should file an
administrative appeal.
Similarly, the request for conditions by the Four Cities, to which CSX replied,
are requests for
modification, which must be pursued in an administrative appeal.

In sum, the Draft EIS and Final EIS plainly show that we have taken the
requisite "hard
look" at environmental issues in this case. With the exception of the minor
modifications
discussed above, we concur in SEA's detailed analysis and recommendations and
believe that
our final environmental mitigation conditions are reasonable and feasible
measures to reduce or
eliminate potential adverse environmental impacts of the transaction. They
provide appropriate
safeguards to ensure that applicants maintain safe operations and protect the
environment and the
quality of life in affected communities to the extent practicable following
consolidation of the
three rail systems into two systems.(255)

OVERSIGHT CONDITION. We are establishing
oversight for 5 years so that we may
assess the progress of implementation of the CSX/NS/Conrail transaction and the
workings of
the various conditions we have imposed, and we are retaining jurisdiction to
impose additional
conditions if, and to the extent, we determine that additional conditions are
necessary to address
unforseen harms caused by the transaction.(256) Although the NITL settlement agreement
proposes
that we require oversight of the transaction for a 3-year period, we believe
that a 5-year oversight
period would be more appropriate, given the operational complexity and broad
scope of this
transaction.(257)

Our oversight process will be broadly based. As part of that process, we
will monitor
situations involving the relationship of shortline railroads to their Class I
connections and to
other Class I railroads.(258) This will
include oversight of the conditions we have imposed to
ensure that quality interline service and connections are in place to maintain
the viability of
certain shortline railroads (such as AA and W&LE); to ensure that the
transaction does not result
in shortline railroads (such as RBMN) suffering from the expansion of any
existing blocking
provisions; and to ensure that the single-line to joint-line and reciprocal
switching protections of
the NITL agreement are appropriately extended to shortline railroads. Our
oversight will also
include assessing the effect of the acquisition premium on the jurisdictional
threshold applicable
to rate reasonableness cases and to the Board's revenue adequacy
determinations; transaction-related impacts on Amtrak passenger operations and
regional rail passenger operations; and
transaction-related impacts within the Chicago Switching District, including
the effect of IHB's
management change on its role as a neutral switching carrier. If problems do
arise after approval
and consummation of the transaction, involving these and other matters, our
oversight condition
should provide a fully effective mechanism for quickly identifying and
resolving them. Also,
under our oversight process, we will continue appropriate monitoring of the
environmental
mitigating conditions being imposed, as listed in Appendix Q.

Our oversight will also encompass ensuring applicants' adherence to the
various
representations that they have made on the record during the course of this
proceeding. This
includes ensuring that applicants adhere to their representation that, although
NS will have
operational control of Conrail's MGA lines, CSX will have equal access to all
current and future
facilities located on or accessed from such lines. In addition to our
operational monitoring, we
will be closely monitoring the competitive activities in this important joint
access area. Our
oversight will also enable us to ensure that CSX adheres to its representation
regarding
investment in new connections and upgraded facilities in the Buffalo area, to
monitor the studies
of the feasibility of upgrading cross harbor float and tunnel operations for
the purpose of
alleviating motor vehicle traffic congestion and air pollution in New York
City, and to monitor
the routings for truck traffic at applicants' intermodal terminals in Northern
New Jersey and in
the Commonwealth of Massachusetts, which could affect trucks traffic moving
over the George
Washington Bridge.

Finally, we note that our 5-year oversight is separate from our operational
monitoring,
which is discussed in detail in its own section of this decision. In that
section we have explained
that, as a result of our ongoing experience or changed circumstances,
particular aspects of the
operational monitoring may be changed or eliminated. Operational monitoring
could be phased
out upon successful implementation of the transaction, which should take place
in advance of
completion of the 5-year oversight period.

OPERATIONAL MONITORING. Because we believe
that the scope and complexity
of the operational aspects of this transaction are unprecedented, we will
require transitional
operational monitoring from the start. Certain aspects of the operational
monitoring will begin
with the effective date of the decision, August 23, 1998, and certain aspects
will begin with Day
One.

The purpose of the monitoring is to provide us with information that will
allow a timely
evaluation of, and response to, any issues that arise during implementation of
various operational
aspects of the transaction. While this monitoring will require periodic status
and progress reports
from applicants, we do not believe that it will be unduly burdensome. As
noted, this monitoring
will include activities ongoing prior to Day One. For these areas -- Labor
Implementing
Agreements, Construction And Other Capital Projects, Information Technology,
and Customer
Service -- monitoring will begin on August 23, 1998. For other operational
categories --
Division of Power and Rolling Stock, Car Management, Crew Management and
Dispatching,
SAAs, the Monongahela Coal Area, Cleveland Operations, Chicago Gateway
Operations, and
Yard and Terminal Operations -- applicants must begin reporting on Day One.

Finally, we will require reporting on certain of applicants' own
initiatives, such as the
Conrail Transaction Council (Transaction Council) and Labor Task Forces. This
reporting will
provide us timely information for implementing measures that may directly
affect operations.

We recognize that, under the NITL agreement, the Transaction Council will
recommend
to us measurable standards for quarterly reporting. That process has just
begun; nonetheless, we
need to begin monitoring certain operational issues immediately. The
information we are
requiring should also be useful to applicants in their preparation of the
recommended standards
and reports to carry out the NITL agreement.

This informational monitoring is separate from our 5-year oversight of the
transaction. It
may turn out that, as a result of our experience, or of changed circumstances,
particular aspects of
this monitoring will be changed or eliminated. Further, operational monitoring
could be phased
out upon successful implementation of the transaction, which should take place
in advance of
completion of the 5-year oversight period.

Our specific reporting requirements are set forth below:

1. Labor Implementing Agreements. Beginning August 23,
applicants must provide
monthly reports about the status of each of their labor implementing
agreements, and affected
area (geographical or technical), until all of the agreements are complete.

2. Construction And Other Capital Projects. Beginning
August 23, CSX and NS
must report monthly on their respective projects, including any planned for the
SAAs, whether or
not specifically approved by us. Applicants also must report on their progress
in implementing
other planned infrastructure investments, such as in Cleveland, the Chicago
Terminal area, and
the Monongahela Coal area.

3. Information Technology. To ensure timely integration
of applicants' information
systems, and the training of personnel using the new computer systems,
applicants must report
monthly beginning August 23, as to the progress of systems integration and
personnel training.
These reports must identify the principal systems, affected operating areas,
implementation
schedules, and training schedules and completion, and must note any delays,
either in planned
implementation or training.

4. Customer Service. To achieve and maintain customer
confidence in the transaction,
and to ensure the integration of Conrail lines into the Centralized Customer
Service Centers of
CSX and NS, applicants must report monthly beginning August 23, on that
transition, along with
staffing and training of personnel. Reporting must also include information as
to efforts to
familiarize customers with any new processes that they may encounter in using
the systems.

5. Power And Rolling Stock. As soon as possible after
the effective date of the
decision, but no later than Day One, applicants must report on the
apportionment of the Conrail
locomotive and freight car fleets. This report must categorize the freight and
locomotive
equipment by type, and must indicate the number of each type assumed by each
applicant.

6. Car Management, Crew Management And Dispatching.
Critical to an efficient
and safe operational transition are the areas of car management, crew
management and train
dispatching. These areas include consolidation of the car management functions
into the
respective operating systems, crew training to familiarize employees with new
operating
territories and with different locomotives and other equipment, and employee
time keeping.
Also critical is complete familiarization with any new train and traffic
control systems.
Applicants will be required to certify, to the extent transition has occurred
as of Day One, that all
affected employees have been fully trained and qualified to operate over the
territories they will
be assigned (either Conrail, CSX, or NS); that assigned employees are qualified
to access and
operate the information management systems related to crew management, time
keeping, and
train dispatching; and that train, traffic control and car management systems
are in place, fully
operational, and fully staffed.

7. Shared Assets Areas. The proposed operating
arrangements for the SAAs, North
Jersey, South Jersey/Philadelphia, and Detroit, present many unique situations
requiring close
scrutiny. Applicants will be required, beginning Day One, to detail the
operations for all three
SAAs as follows:

Provide, each Monday, daily status reports for each of the three SAAs for
the previous
5-day period (Monday - Friday). For each respective SAA, and each yard in each
SAA
where appropriate, reports are to include (1) fluid yard capacity; (2) cars on
hand loaded
and empty; (3) cars handled per day; (4) average daily dwell time for cars
handled; and
(5) daily train origination information, as measured against current
schedules for trains
originating in the respective SAA. Significant areas of delay must be
discussed in the
transmittal of the weekly report, and the reason for the delay or late
origination must be
noted, e.g., (C) held for crews; (P) held for power.

8. Monongahela Coal Area. While this area does not
contain the operating complexity
of an SAA, it is nonetheless an important area subject to special arrangements
in that NS will
operate and maintain the area subject to a joint use agreement with CSX.
Therefore, we will ask
the Transaction Council to report to us any operating or service problems
brought to the
Council's attention. In addition, CSX has indicated that it plans to increase
the capacity of
Newell Yard, within the Monongahela Coal Area, to accommodate new coal traffic
that it will
move after the transaction. Therefore, we will require CSX to include Newell
Yard with its
reporting of Construction And Other Capital Projects.

9. Cleveland Operations. The Cleveland area presents a
mix of yards and belt and main
line trackage in industrialized and heavily populated areas with numerous
at-grade crossings.
CSX and NS have modified their original operating plans to address concerns
regarding
operating density in the greater Cleveland area, and we will monitor the
Cleveland area to ensure
the success of these commitments. Construction projects that will be monitored
include the
Cloggsville Connection, the Rockport Yard realignment, and the construction of
connections and
crossovers in the Coen Road area in Vermilion, OH, which are critical to the NS
Cleveland
operation. Progress reports for these projects must be included in the monthly
Construction And
Other Capital Projects reporting.

10. Chicago Gateway Operations. Beginning Day One,
applicants will be required to
report weekly on the number and on time delivery of run through trains
delivered to western
carriers via the Chicago gateway, including Streator, IL, by major commodity
group. These
reports shall indicate whether the connections were on time within two hours,
based on the
current schedules. Significant areas of delay must be discussed in the
transmittal of the weekly
report.

11. Yards And Terminals. Beginning Day One, applicants
will report on the activity of
their respective major yard facilities, identified in Appendix R. This shall
include a daily status
report for each yard listed in the Appendix, for 1 day, Wednesday, to be
submitted with other
required reporting each Monday. These reports must include those informational
items requested
for the SAAs, with one exception: the terminal on-time performance for
origination times must
be reflected instead by the information contained in the reporting element
covering on time
performance. Because Manifest trains typically require more yard or terminal
handling than
other types of through-movement trains, there is a greater likelihood for
Manifest trains to be
adversely affected by yard congestion and delays. Therefore, applicants, in
their major corridor
on time performance report, must pay close attention to the movement of these
trains through the
reporting yards and terminals and the reasons for any delays. In addition,
applicants will require
the Indiana Harbor Belt Railroad Company (IHB) to file similar information on
the operations of
its yards in the Chicago area noted in Appendix R.

12. On Time Performance. Beginning Day One, applicants
will select and report on the
performance of their trains in twelve major corridors (6 CSX and 6 NS). The
trains reported on
must be identified by the following commodity groups: (I) Intermodal, (M)
Manifest, (U) Unit,
and (A) Automobile (parts and finished) if identified separately from
Manifest. Significant areas
of delay must be discussed in the transmittal of the weekly report, and the
reason for the delays
must be noted, e.g., (C) held for crews; (P) held for power, (D) delayed at
connection.

13. The Conrail Transaction Council. Beginning August
23, the Transaction Council
will be asked to report monthly on its meetings, and on specific elements of
the transaction that
were the subject of discussion or that are of concern. This is particularly
the case for the areas of
information technology, shared assets, and customer service.

14. Labor Task Forces. We will require monthly
reporting, beginning August 23, on
the establishment of labor task forces by applicants, along with an explanation
of their objectives
and initiatives.

15. Data Requirements And Handling. The data contained
in the required reporting
for review by our staff must be submitted to us in computer-ready format
wherever possible.
While we do not plan to make all of the reporting information publicly
available, unless a
proceeding is instituted concerning alleged service failure, we will place
reports filed pursuant to
reporting elements 1, 2, 3, 4, 5, 6, 7, 8, 9, 13, and 14, in the docket as they
are filed, along with
the transmittal letter for the weekly reporting describing significant delays
noted in elements 10
and 12. We are making these reports available to the public because they are
informative but do
not contain commercially sensitive information. Moreover, we would expect
applicants to share
the monitoring information with the Transaction Council and, as appropriate,
with the Labor
Task Forces. All reporting will be made directly to the Director, Office of
Compliance and
Enforcement (OCE), Suite 780, at the Board's headquarters. The Director of OCE
is authorized
to change or supplement these data requirements, after consultation with the
Board.

FINDINGS

In STB Finance Docket No. 33388, we find: (a) that the acquisition and
exercise of
control of CRR and CRC by CSX and NS, and the resulting joint and common
control of CRR,
CRC, NYC, and PRR, through the proposed transaction, as conditioned herein, is
within the
scope of 49 U.S.C. 11323 and is consistent with the public interest;
(b) that the proposed
transaction will not adversely affect the adequacy of transportation to the
public; (c) that no other
railroad in the area involved in the proposed transaction has requested
inclusion in the
transaction, and that failure to include other railroads will not adversely
affect the public interest;
(d) that the proposed transaction will not result in any guarantee or
assumption of payment of
dividends or any increase in fixed charges except such as are consistent with
the public interest;
(e) that the interests of employees affected by the proposed transaction do not
make such
transaction inconsistent with the public interest, and any adverse effect will
be adequately
addressed by the conditions imposed herein; (f) that the proposed transaction,
as conditioned
herein, will not significantly reduce competition in any region or in the
national rail system; and
(g) that the terms of the proposed transaction, including the terms of the
acquisition of CRR
stock, are just, fair, and reasonable to the stockholders of CRR, CSXC, and
NSC. We further
find that the conditions imposed in STB Finance Docket No. 33388,
including but not limited to
the various competitive conditions and the oversight and operational monitoring
conditions, are
consistent with the public interest. We further find that any rail employees
of applicants or their
rail carrier affiliates affected by the transaction authorized in STB Finance
Docket No. 33388,
and any rail employees of the carriers involved in the trackage rights
arrangements imposed as
conditions in STB Finance Docket No. 33388, should be protected by the
conditions set forth in
the labor protective conditions set forth in New York Dock,
Mendocino Coast, Norfolk and
Western, and Oregon Short Line, as appropriate,(259) unless different conditions are provided
for in
a labor agreement entered into prior to consummation of the transaction
authorized in STB
Finance Docket No. 33388, in which case protection shall be at the negotiated
level, subject to
our review to assure fair and equitable treatment of affected employees.

The foregoing findings specifically extend to the following elements of the
transaction
authorized in STB Finance Docket No. 33388: (a) the joint acquisition of
control of CRR and
CRC by CSX and NS; (b) the assignment of certain assets of CRC (including,
without limitation,
trackage and other rights) to NYC to be operated as part of CSXT's rail system
and the
assignment of certain assets of CRC (including, without limitation, trackage
and other rights) to
PRR to be operated as part of NSR's rail system (collectively, the NYC/PRR
assignments), with
NYC and PRR having, except to the extent limited in this decision, such right,
title, interest in
and other use of such assets as CRC itself had; (c) the entry by CSXT into the
CSXT Operating
Agreement and the operation by CSXT of the assets held by NYC; the entry by NSR
into the
NSR Operating Agreement and the operation by NSR of the assets held by PRR; and
the entry by
CSXT, NSR, and CRC into the Shared Assets Areas Operating Agreements and the
operation by
CSXT, NSR, and CRC thereunder of assets held by CRC, with CSXT and NSR
respectively
acquiring the right to operate and use the Allocated Assets and the Shared
Assets, subject to the
terms of the Allocated Assets Operating Agreements, the Shared Assets Areas
Operating
Agreements, and other Ancillary Agreements, as fully as CRC itself had
possessed the right to
use them, except to the extent limited in this decision; (d) the continued
control by CSX, NS, and
CRR of NYC and PRR, subsequent to the transfer of CRC assets to NYC and PRR,
and the
common control by CSXC, CSXT, NSC, NSR, CRR, and CRC of NYC and PRR, and the
carriers each of them controls; (e) the acquisition by CSXT and NSR of the
trackage rights listed
in items 1.B and 1.A, respectively, of Schedule 4 of the Transaction Agreement;
the acquisition
by CSXT and NSR of the rights with respect to the NEC listed in Item 1.C of
that schedule;(260)
and the acquisition by CSXT of the rights provided for by the Monongahela Usage
Agreement;
(f) the acquisition by CRC from CSXT and NSR, and by CSXT and NSR from
each other, of
certain incidental trackage rights over certain line segments, as identified in
Section 3(c) of each
of the three Shared Assets Areas Operating Agreements; and (g) the transfer of
CRC's Streator
Line to NS.

We further find that, upon consummation of the authorized control and the
NYC/PRR
assignments, it is consistent with the public interest and necessary for
applicants to carry out the
transaction authorized in STB Finance Docket No. 33388 that, except to the
extent limited in this
decision, NYC and PRR shall have all of such right, title, interest in and
other use of such assets
as CRC itself had, notwithstanding any provision in any law, agreement, order,
document, or
otherwise, purporting to limit or prohibit CRC's unilateral transfer or
assignment of such assets
to another person or persons, or purporting to affect those rights, titles,
interests, and uses in the
case of a change in control.

We further find that, upon consummation of the authorized control and the
CSXT
Operating Agreement, the NSR Operating Agreement, and the Shared Assets Areas
Operating
Agreements, it is consistent with the public interest and necessary for
applicants to carry out the
transaction authorized in STB Finance Docket No. 33388 that, except to the
extent limited in this
decision, CSXT and NSR shall have the right to operate and use the Allocated
Assets allocated to
each of them and the Shared Assets, including those presently operated by CRC
under trackage
rights or leases (including but not limited to those listed in Appendix L to
the application),(261)
subject to the terms of the Allocated Assets Operating Agreements, the Shared
Assets Areas
Operating Agreements, and other Ancillary Agreements as fully as CRC itself had
possessed the
right to use them, notwithstanding any provision in any law, agreement, order,
document, or
otherwise, purporting to limit or prohibit CRC's unilateral assignment of its
operating rights to
another person or persons, or purporting to affect those rights in the case of
a change in control.

We further find, with respect to the Allocated Assets and the assets in
Shared Assets
Areas consisting of assets other than routes (including, without limitation,
the CRC Existing
Transportation Contracts), that it is consistent with the public interest and
necessary for
applicants to carry out the transaction authorized in STB Finance Docket
No. 33388 that, except
to the extent limited in this decision, CSXT and NSR shall have the right to
use, operate,
perform, and enjoy such assets to the same extent as CRC itself could,
notwithstanding any
provision in any law, agreement, order, document, or otherwise, purporting to
limit or prohibit
CRC's assignment of its rights to use, operate, perform, and enjoy such assets
to another person
or persons, or purporting to affect those rights in the case of a change in
control.

We further find that the NYC/PRR assignments are not within the scope of 49
U.S.C.
10901.

We further find that, after the Closing Date, CRC will remain a "rail
carrier" as defined at
49 U.S.C. 10102(5).

We further find that, subject to the modifications made in this decision,
the terms of the
NITL agreement are consistent with the public interest.

We further find that, to the extent that the ownership interests and
control by CSX and
NS over CRR, CRC, NYC, or PRR, or any other matter provided for in the
Transaction
Agreement or the Ancillary Agreements referred to therein may be deemed to be a
pooling or
division by CSX and NS of traffic or services or any part of earnings by CSX,
NS, or Conrail
within the scope of 49 U.S.C. 11322, such pooling or division will be in
the interest of better
service to the public or of economy of operation, or both, and will not
unreasonably restrain
competition.

We further find that the discontinuance of the temporary trackage rights to
be granted to
NSR on the CRC line between Bound Brook, NJ, and Woodbourne, PA (to be assigned
to NYC
and operated by CSXT), at the time and on the terms provided for in the
Transaction Agreement
and the Ancillary Agreements referred to therein, is required or permitted by
the present or future
public convenience and necessity and will not have a serious, adverse impact on
rural and
community development.

In STB Finance Docket No. 33388 (Sub-No. 1), we find that the proposed
operation of a
connection track is exempt from prior review and approval pursuant to 49 CFR
1150.36.

In STB Finance Docket No. 33388 (Sub-Nos. 2, 3, 4, 5, 6, and 7), we find
that the
proposed operation of connection tracks are exempt from prior review and
approval pursuant to
49 U.S.C. 10502 because such review is not necessary to carry out the
transportation policy of 49
U.S.C. 10101 and regulation is not needed to protect shippers from the abuse of
market power.

In STB Finance Docket No. 33388 (Sub-Nos. 10, 12, 14, 18, 21, and 22), we
find that the
proposed construction and operation of connection tracks are exempt from prior
review and
approval pursuant to 49 U.S.C. 10502 because such review is not necessary to
carry out the
transportation policy of 49 U.S.C. 10101 and regulation is not needed to
protect shippers from
the abuse of market power.

In STB Finance Docket No. 33388 (Sub-No. 23), we find that the relocation
of NW's rail
line at Erie, PA, is exempt from prior review and approval pursuant to 49 CFR
1180.2(d)(5). We
further find that any rail employees of applicants or their rail carrier
affiliates affected by the
transaction authorized in STB Finance Docket No. 33388 (Sub-No. 23) should
be protected by
the conditions set forth in Oregon Short Line, unless different
conditions are provided for in a
labor agreement entered into prior to consummation of that transaction, in
which case protection
shall be at the negotiated level, subject to our review to assure fair and
equitable treatment of
affected employees.

In STB Finance Docket No. 33388 (Sub-No. 24), we find that the transfer of
NW's rail
line between Fort Wayne, IN, and Tolleston (Gary), IN, to CRC is exempt
from prior review and
approval pursuant to 49 U.S.C. 10502 because such review is not necessary to
carry out the
transportation policy of 49 U.S.C. 10101 and regulation is not needed to
protect shippers from
the abuse of market power. We further find that any rail employees of
applicants or their rail
carrier affiliates affected by the transaction authorized in STB Finance Docket
No. 33388 (Sub-No. 24) should be protected by the conditions set forth in
New York Dock, unless different
conditions are provided for in a labor agreement entered into prior to
consummation of that
transaction, in which case protection shall be at the negotiated level, subject
to our review to
assure fair and equitable treatment of affected employees.

In STB Finance Docket No. 33388 (Sub-Nos. 25, 27, 28, 29, 30, 32, 33, and
34), we find
that the acquisitions of trackage rights by applicants are exempt from prior
review and approval
pursuant to 49 CFR 1180.2(d)(7). We further find that any rail employees of
applicants or their
rail carrier affiliates affected by the transactions authorized in STB Finance
Docket No. 33388
(Sub-Nos. 25, 27, 28, 29, 30, 32, 33, and 34) should be protected by the
conditions set forth in
Norfolk and Western, unless, with respect to any such transaction,
different conditions are
provided for in a labor agreement entered into prior to consummation of such
transaction, in
which case protection shall be at the negotiated level, subject to our review
to assure fair and
equitable treatment of affected employees.

In STB Finance Docket No. 33388 (Sub-No. 26), we find that the acquisition
and
exercise of control of LD&RT by CSXC and CSXT, and the common control of
LD&RT,
CSXT, and other rail carriers controlled by CSXT and/or CSXC, is within the
scope of 49 U.S.C.
11323 and will not substantially lessen competition, create a monopoly, or
restrain trade in
freight surface transportation in any region of the United States. We further
find that any rail
employees of applicants or their rail carrier affiliates affected by the
transaction authorized in
STB Finance Docket No. 33388 (Sub-No. 26) should be protected by the
conditions set forth in
New York Dock, unless different conditions are provided for in a
labor agreement entered into
prior to consummation of that transaction, in which case protection shall be at
the negotiated
level, subject to our review to assure fair and equitable treatment of affected
employees.

In STB Finance Docket No. 33388 (Sub-No. 31), we find that the acquisition,
by CSX, of
a 50% interest in APR will not result in an acquisition of control within the
scope of 49 U.S.C.
11323.

In STB Finance Docket No. 33388 (Sub-No. 36), we find that the
responsive application
filed by I & M Rail Link, LLC, is not consistent with the public interest.

In STB Finance Docket No. 33388 (Sub-No. 39), we find that the
responsive application
filed by Livonia, Avon & Lakeville Railroad Corporation is consistent with
the public interest to
enable LAL to cross Conrail's Genesee Junction Yard to connect directly with
the Rochester &
Southern Railroad, permitting LAL to reach NS. In all other respects, we find
that the responsive
application filed by LAL is not consistent with the public interest.

In STB Finance Docket No. 33388 (Sub-No. 59), we find that the
responsive application
filed by Wisconsin Central Ltd. is not consistent with the public interest.

In STB Finance Docket No. 33388 (Sub-No. 62), we find that the
responsive application
filed by Illinois Central Railroad Company is not consistent with the public
interest.

In STB Finance Docket No. 33388 (Sub-No. 63), we find that the
responsive application
filed by R.J. Corman Railroad Company/Western Ohio Line is not consistent with
the public
interest.

In STB Finance Docket No. 33388 (Sub-No. 69), we find that the
responsive application
filed jointly by the State of New York, acting by and through its
Department of Transportation,
and the New York City Economic Development Corporation, acting on behalf of the
City of
New York, is consistent with the public interest to the extent it seeks to
require CSX to cooperate
in developing intramodal rail service in the area east of the Hudson River, as
discussed in this
decision. In all other respects, we find that the responsive application filed
by NYDOT and
NYCEDC is not consistent with the public interest.

In STB Finance Docket No. 33388 (Sub-No. 75), we find that the
responsive application
filed by New England Central Railroad, Inc., is consistent with the public
interest to the extent it
seeks to require applicants to grant it trackage rights between Palmer and
Springfield, MA. In all
other respects, we find that the responsive application filed by NECR is not
consistent with the
public interest.

In STB Finance Docket No. 33388 (Sub-No. 76), we find that the
responsive application
filed by Indiana Southern Railroad, Inc., is not consistent with the public
interest.

In STB Finance Docket No. 33388 (Sub-No. 78), we find that the
responsive application
filed by Ann Arbor Acquisition Corporation d/b/a Ann Arbor Railroad is not
consistent with the
public interest.

In STB Finance Docket No. 33388 (Sub-No. 80), we find that the
responsive application
filed by Wheeling & Lake Erie Railway Company is consistent with the public
interest to the
extent it seeks: overhead haulage or trackage rights access to Toledo, OH,
with connections to
the Ann Arbor Railroad and other railroads at Toledo; an extension of
W&LE's lease at, and
trackage rights access to, NS' Huron Dock on Lake Erie; and overhead haulage or
trackage rights
to Lima, OH, with a connection to the Indiana & Ohio Railway Company at
Lima. We further
find that the responsive application filed by W&LE is consistent with the
public interest to the
extent it seeks to require applicants to negotiate with W&LE concerning
mutually beneficial
arrangements, including allowing W&LE to provide service to aggregates
shippers or to serve
shippers along CSX's line between Benwood and Brooklyn Junction, WV. In all
other respects,
we find that the responsive application filed by W&LE is not consistent
with the public interest.

In STB Docket Nos. AB-167 (Sub-No. 1181X) and AB-55 (Sub-No. 551X), we
find that
the abandonment by CRC and CSXT, respectively, of an approximately 29-mile
portion of the
Danville Secondary Track between MP 93.00± at Paris, IL, and MP
122.00± at Danville, IL, is
exempt from prior review and approval pursuant to 49 CFR 1152.50.

In STB Docket No. AB-290 (Sub-No. 194X), we find that the abandonment by NW
of an
approximately 21.5-mile line between MP SK-2.5 near South Bend, IN, and
MP SK-24.0 near
Dillon Junction, IN, is exempt from prior review and approval pursuant to
49 CFR 1152.50.

In STB Docket No. AB-290 (Sub-No. 196X), we find that the abandonment by NW
of an
approximately 7.5-mile line between MP TM-5.0 in Toledo, OH, and MP
TM-12.5 near
Maumee, OH, is exempt from prior review and approval pursuant to 49 U.S.C.
10502 because
such review is not necessary to carry out the transportation policy of 49
U.S.C. 10101 and
regulation is not needed to protect shippers from the abuse of market power.

In STB Docket No. AB-290 (Sub-No. 197X), we find that the discontinuance by
NW of
operations over the Toledo Pivot Bridge extending between MP CS-2.8 and
MP CS-3.0 near
Toledo, OH, a distance of approximately 0.2 miles, is exempt from prior
review and approval
pursuant to 49 CFR 1152.50.

In STB Docket Nos. AB-167 (Sub-No. 1181X), AB-55 (Sub-No. 551X), and
AB-290
(Sub-Nos. 194X, 196X, and 197X), we further find that any employees affected by
the
abandonments and/or discontinuance authorized therein should be protected by
the conditions set
forth in Oregon Short Line, unless different conditions are provided for
in a labor agreement
entered into prior to consummation of the relevant abandonment or
discontinuance, in which case
protection shall be at the negotiated level, subject to our review to assure
fair and equitable
treatment of affected employees.

We further find, on the basis of the final Environmental Impact Statement
issued in this
proceeding, that this action, as conditioned by the environmental mitigation
conditions set forth
in Appendix Q, will not result in any significant adverse environmental impacts
on a systemwide
basis and that its approval will result in environmental benefits, including
reduced air pollutant
emissions and the conservation of energy resources, on a systemwide basis.

We further find that changes in traffic levels resulting from this action
will cause
beneficial environmental effects on a regional and local basis, and will cause
adverse
environmental effects in regional and local areas, depending on whether traffic
levels are
decreasing or increasing. We find that, with the environmental mitigation
conditions set forth in
Appendix Q, the adverse regional and local environmental effects do not
outweigh the beneficial
transportation and systemwide, regional, and local environmental effects of the
transactions
authorized in the STB Finance Docket No. 33388 proceeding and the embraced
proceedings.

We further find that, to the extent that there are significant adverse
local environmental
impacts resulting from the transactions authorized in the STB Finance Docket
No. 33388
proceeding and the embraced proceedings, mitigation of these impacts is
warranted only where
the costs and burdens of that mitigation would not impair the implementation of
these
transactions or significantly reduce the operational efficiencies and other
public interest benefits
justifying our approval of these transactions.

We further find that the conditions set forth in Appendix Q with respect to
environmental
mitigation are consistent with the public interest and with the National
Environmental Policy
Act.

We further find that the proposed construction projects and abandonments,
as conditioned
by the environmental mitigation conditions set forth in Appendix Q, will not
significantly affect
the quality of the human environment or the conservation of energy resources.

We further find that all other conditions requested by any party to the STB
Finance
Docket No. 33388 proceeding or any of the embraced proceedings but not
specifically approved
in this decision are not in the public interest and should not be imposed.

It is ordered:

1. In STB Finance Docket No. 33388, the application filed by CSXC, CSXT,
NSC, NSR,
CRR, and CRC is approved, subject to the imposition of the conditions discussed
in this
decision. The Board expressly reserves jurisdiction over the STB Finance
Docket No. 33388
proceeding and all embraced proceedings in order to implement the 5-year
oversight condition
imposed in this decision and, if necessary, to impose additional conditions
and/or to take other
action if, and to the extent, we determine it is necessary to impose additional
conditions and/or to
take other action to address harms caused by the CSX/NS/CR transaction.(262)

2. If CSXC, CSXT, NSC, and NSR assume control over CRR and CRC, they shall
confirm in writing to the Board, within 15 days after such assumption of
control, the date of such
assumption. Applicants shall submit to the Board three copies of the journal
entries, if any,
recording such assumption of control.

3. Applicants shall give 14 days' prior notice to the Board and to
the public of the date
that will be designated as Day One.(263)

4. If applicants effect the Division, they shall confirm in writing to the
Board, within 15
days after Day One, the date on which the Division was effected (i.e., the date
that was Day
One). Applicants shall submit to the Board three copies of the journal
entries, if any, recording
the Division.

5. All notices to the Board as a result of any authorization shall refer
to this decision by
service date and docket number.

6. No change or modification shall be made in the terms and conditions
approved in the
authorized application without the prior approval of the Board.

7. Except as otherwise provided in this decision, the approval granted
herein expressly
includes, without limitation, the following elements of the transaction as
provided for in the
application and in the Transaction Agreement and the Ancillary Agreements
referred to therein:
(a) the joint acquisition of control of CRR and CRC by CSX and NS; (b) the
NYC/PRR
assignments; (c) the entry by CSXT into the CSXT Operating Agreement and the
operation by
CSXT of the assets held by NYC; (d) the entry by NSR into the NSR
Operating Agreement and
the operation by NSR of the assets held by PRR; (e) the entry by CSXT, NSR, and
CRC into the
Shared Assets Areas Operating Agreements and the operation by CSXT, NSR, and CRC
thereunder of assets held by CRC; (f) the continued control by CSX, NS, and CRR
of NYC and
PRR, subsequent to the transfer of CRC assets to NYC and PRR, and the common
control by
CSXC, CSXT, NSC, NSR, CRR, and CRC of NYC and PRR, and the carriers each of them
controls; (g) the acquisition by CSXT and NSR of the trackage rights
listed in Items 1.B and 1.A,
respectively, of Schedule 4 of the Transaction Agreement; (h) the acquisition
by CSXT and NSR
of the rights with respect to the NEC listed in Item 1.C of that Schedule; (i)
the acquisition by
CSXT of the rights provided for by the Monongahela Usage Agreement; (j) the
acquisition by
CRC from CSXT and NSR, and by CSXT and NSR from each other, of certain
incidental
trackage rights over certain line segments, as identified in Section 3(c) of
each of the three
Shared Assets Areas Operating Agreements; and (k) the transfer of CRC's
Streator Line to NS.

8. Except as otherwise provided in this decision, NYC and PRR shall have,
upon
consummation of the authorized control and the NYC/PRR assignments, all of such
right, title,
interest in and other use of such assets as CRC itself had, notwithstanding any
provision in any
law, agreement, order, document, or otherwise, purporting to limit or prohibit
CRC's unilateral
transfer or assignment of such assets to another person or persons, or
purporting to affect those
rights, titles, interests, and uses in the case of a change of control.

9. Except as otherwise provided in this decision, CSXT and NSR may
conduct, pursuant
to 49 U.S.C. 11321, operations over the routes of Conrail as provided for in
the application,
including those presently operated by CRC under trackage rights or leases
(including but not
limited to those listed in Appendix L to the application), as fully and to the
same extent as CRC
itself could, notwithstanding any provision in any law, agreement, order,
document, or otherwise,
purporting to limit or prohibit CRC's unilateral assignment of its operating
rights to another
person or persons, or purporting to affect those rights in the case of a change
in control.

10. Except as otherwise provided in this decision, CSXT and NSR may use,
operate,
perform, and enjoy the Allocated Assets and the assets in Shared Assets Areas
consisting of
assets other than routes (including, without limitation, the Existing
Transportation Contracts), as
provided for in the application and pursuant to 49 U.S.C. 11321, to the same
extent as CRC itself
could, notwithstanding any provision in any law, agreement, order, document, or
otherwise,
purporting to limit or prohibit CRC's assignment of its rights to use, operate,
perform, and enjoy
such assets to another person or persons, or purporting to affect those rights
in the case of a
change in control. As respects any CRC Existing Transportation Contract (i.e.,
any CRC
transportation contract in effect as of Day One) that contains an
antiassignment or other similar
clause: at the end of the 180-day period beginning on Day One, a shipper
with such a contract
may elect either (a) to continue the contract until the expiration thereof
under the same terms
with the same carrier that has provided service during the 180-day period, or
(b) to exercise
whatever termination rights exist under the contract, provided the shipper
gives 30 days' written
notice to the serving carrier.

11. To the extent that the ownership interests and control by CSX and NS
over CRR,
CRC, NYC, or PRR, or any other matter provided for in the Transaction Agreement
or in the
Ancillary Agreements referred to therein, may be deemed to be a pooling or
division by CSX and
NS of traffic or services or any part of earnings by CSX, NS, or Conrail within
the scope of
49 U.S.C. 11322, such pooling or division is approved pursuant to
49 U.S.C. 11321 and 11322.

12. Discontinuance of the temporary trackage rights to be granted to NSR
on the CRC
line between Bound Brook, NJ, and Woodbourne, PA (to be assigned to NYC and
operated by
CSXT), at the time and on the terms provided for in the Transaction Agreement,
is approved.

13. The terms of the acquisition of CRR stock by CSXC, NSC, Tender Sub,
and Merger
Sub are fair and reasonable to the stockholders of CRR, CSXC, and NSC.

14. The NYC/PRR assignments are not within the scope of 49 U.S.C.
10901.

15. CRC will continue to be, after the Closing Date, a "rail carrier" as
defined at 49
U.S.C. 10102(5).

16. Applicants must comply with all of the conditions imposed in this
decision, whether
or not such conditions are specifically referenced in these ordering paragraphs.

17. Applicants must comply with the environmental mitigation conditions
set forth in
Appendix Q.

18. Applicants must comply with the operational monitoring condition
imposed in this
decision, and, in connection therewith, must file periodic status reports and
progress reports, as
indicated in this decision.

19. Applicants must adhere to all of the representations they made during
the course of
this proceeding, whether or not such representations are specifically
referenced in this decision.

20. Applicants must adhere to all of the terms of the NITL agreement,
subject to the
modifications made in this decision.(264)

21. Applicants must adhere to the terms of the settlement agreements that
were entered
into with Amtrak, ESPA, STWRB, the City of Indianapolis, and UTU.

22. Applicants must monitor origins, destinations, and routings for the
truck traffic at
their intermodal terminals in Northern New Jersey and in the Commonwealth of
Massachusetts
in a manner that will allow us to determine whether the CSX/NS/CR transaction
has led to
substantially increased truck traffic over the George Washington Bridge.
Applicants should
report their results on a quarterly basis.

23. Applicants: must allow IP&L to choose between having its Stout
plant served by NS
directly or via switching by INRD; must allow for the creation of an NS/ISRR
interchange at
MP 6.0 on ISRR's Petersburg Subdivision for traffic moving to/from either
the Stout plant or the
Perry K plant; and must provide conditional rights for either NS or ISRR to
serve any build-out
to the Indianapolis Belt Line.

24. Applicants must consult with ASHTA concerning the routing of its
hazardous
materials shipments.

25. Applicants and the Port of Wilmington must enter into discussions
respecting any
problems concerning switching services and charges, and must advise us, no
later than
September 21, 1998, of the status of these discussions.

26. Applicants must adhere to their representation that, although NS will
have
operational control of Conrail's MGA lines, CSX will have equal access to all
current and future
facilities located on or accessed from such lines.

27. Applicants should meet with labor representatives and attempt to form
task forces for
the purpose of promoting labor-management dialogue concerning implementation
and safety
issues.

28. CSX must attempt to negotiate, with CP, an agreement pursuant to which
CSX will
grant CP either haulage rights unrestricted as to commodity and geographic
scope, or trackage
rights unrestricted as to commodity and geographic scope, over the
east-of-the-Hudson Conrail
line that runs between Selkirk (near Albany) and Fresh Pond (in Queens), under
terms agreeable
to CSX and CP, taking into account the investment that needs to continue to be
made to the line.
If CSX and CP have not reached an agreement by October 21, 1998, we will
initiate a proceeding
addressing this matter. CSX and CP should advise us, no later than October 21,
1998, whether
they have or have not reached an agreement.

29. CSX must make, by October 21, 1998, an offer to the City of New York
to establish
a committee intended to develop ways to promote the development of rail traffic
to and from the
City, with particular emphasis on Conrail's Hudson Line, as well as ways to
address the City's
goals of industrial development and the reduction of truck traffic that is
divertible to rail
movement, and CSX's goals to provide safe, efficient, and profitable rail
freight service.

30. CSX must cooperate with the New York interests in studying the
feasibility of
upgrading cross-harbor float and tunnel facilities to facilitate cross-harbor
rail movements, and,
in particular, must participate in New York City's Cross Harbor Freight
Movement Major
Investment Study.

31. CSX must discuss with P&W the possibility of expanded P&W
service over trackage
or haulage rights on the line between Fresh Pond, NY, and New Haven, CT,
focusing on
operational and ownership impediments related to service over that line.

32. CSX must adhere to its agreements with CN and CP that provide for
lower switching
fees in the Buffalo area and increased access to these carriers for
cross-border, truck-competitive
traffic.

33. CSX must meet with regional and local authorities in the Buffalo area
to establish a
committee to promote the growth of rail traffic to and from the Greater Buffalo
area.

34. CSX must transfer to NS the trackage rights now held by CSX over the
Conrail line
that was formerly a Buffalo Creek Railroad line.

35. CSX must adhere to its representation regarding investment in new
connections and
upgraded facilities in the Buffalo area.

36. CSX must attempt to negotiate, with IC, a resolution of the CSX/IC
dispute
regarding dispatching of the Leewood-Aulon line in Memphis. CSX and IC must
advise us, no
later than September 21, 1998, of the status of their negotiations.

37. The $250 maximum reciprocal switching charge provided for in the NITL
agreement
must be applied to certain points in the Niagara Falls area for traffic using
International Bridge
and Suspension Bridge, for which Conrail recently replaced its switching
charges with so-called
"line haul" charges.

38. A 3-year rate study will be initiated to assess whether Buffalo-area
shippers will be
subjected to higher rates because of the CSX/NS/CR transaction.

39. As respects any shortline, such as RBMN, that operates over lines
formerly operated
over by CSX, NS, or Conrail (or any of their predecessors), and that, in
connection with such
operations, is subject to a "blocking" provision: CSX and NS, as appropriate,
must enter into an
arrangement that has the effect of providing that the reach of such blocking
provision is not
expanded as a result of the CSX/NS/CR transaction.

40. As respects AA's new contract with Chrysler, CSX and NS must take no
action that
would undermine, or interfere with AA's ability to provide quality interline
service under, this
contract.

41. The Belt Line Principle advocated by PBL will continue to have, after
implementation of the CSX/NS/CR transaction, the effect, if any, that it
presently has. Nothing
in this decision should be taken to preempt that principle in any way.

42. Conrail's trackage rights on the NS line between Keensburg, IL, and
Carol, IN, must
be transferred to CSX.

43. As respects Wyandot and NL&S, CSX and NS: must adhere to their
offer to provide
single-line service for all existing movements of aggregates, provided they are
tendered in unit-trains or blocks of 40 or more cars; and in other
circumstances including new movements, for
shipments moving at least 75 miles, must arrange run-through operations
(for shipments of
60 cars or more) and pre-blocking arrangements (for shipments of 10 to 60
cars).

44. NS will have access to any new line constructed by JS&S or NS, or
by any entity
other than CSX, between the JS&S facility at Capital Heights, MD, and any
line over which NS
has trackage rights.

45. In STB Finance Docket No. 33388 (Sub-No. 1), the notice, to the extent
not
previously made effective, is accepted.

56. In STB Finance Docket No. 33388 (Sub-No. 39), the responsive
application filed by
LAL: is granted to the extent necessary to permit LAL to operate across
Conrail's Genesee
Junction Yard to reach a connection with R&S; and, otherwise, is denied.
CSX and LAL: must
attempt to negotiate the details of such operations; and, if negotiations are
not fully successful,
may submit separate proposals no later than September 21, 1998.

62. In STB Finance Docket No. 33388 (Sub-No. 69), the responsive
application filed by
NYDOT and NYCEDC is granted in part and denied in part, as indicated in this
decision.

63. In STB Finance Docket No. 33388 (Sub-No. 72), the responsive
application filed by
Belvidere & Delaware River Railway and the Black River & Western
Railroad is dismissed.

64. In STB Finance Docket No. 33388 (Sub-No. 75), the responsive
application filed by
NECR: is granted insofar as it seeks to require CSX to grant NECR trackage
rights between
Palmer, MA, and West Springfield, MA; and, otherwise, is denied. CSX and NECR:
must
attempt to negotiate the details of such trackage rights; and, if negotiations
are not fully
successful, may submit separate proposals no later than September 21, 1998.

68. In STB Finance Docket No. 33388 (Sub-No. 80), the responsive
application filed by
W&LE is granted in part and denied in part. As indicated in this decision,
applicants must (a)
grant W&LE overhead haulage or trackage rights access to Toledo, with
connections to AA and
other railroads at Toledo, (b) extend W&LE's lease at, and trackage rights
access to, NS' Huron
Dock on Lake Erie, and (c) grant W&LE overhead haulage or
trackage rights to Lima, OH, with
a connection to IORY at Lima. Applicants and W&LE must attempt to
negotiate a solution with
regard to these matters; and, if negotiations are not fully successful, may
submit separate
proposals no later than October 21, 1998. Further, applicants and W&LE
must attempt to
negotiate an agreement concerning mutually beneficial arrangements, including
allowing W&LE
to provide service to aggregates shippers or to serve shippers along CSX's line
between Benwood
and Brooklyn Junction, WV, and inform us of any such arrangements reached.

73. In STB Docket Nos. AB-167 (Sub-No. 1181X) and AB-55 (Sub-No. 551X), the
notice of exemption is modified to implement interim trail use/rail banking for
180 days
commencing from July 23, 1998. If an interim trail use/rail banking
agreement is reached, it
must require the trail user to assume, for the term of the agreement, full
responsibility for
management of, for any legal liability arising out of the transfer or use of
(unless the user is
immune from liability, in which case it need only indemnify the railroad
against any potential
liability), and for the payment of any and all taxes that may be levied or
assessed against, the
right-of-way. Interim trail use/rail banking is subject to the future
restoration of rail service and
to the user's continuing to meet the financial obligation for the
right-of-way. If interim trail use
is implemented, and subsequently the user intends to terminate trail use, the
user must (i) send
the Board a copy of the cover page of this decision and the page(s) containing
this ordering
paragraph, and (ii) request that this ordering paragraph be vacated on a
specified date. If any
agreement for interim trail use/rail banking is reached within 180 days of July
23, 1998, interim
trail use may be implemented. If no agreement is reached by that time, CRC or
CSXT (as
appropriate) may fully abandon the line, on or after Day One.(265)

74. In STB Docket Nos. AB-167 (Sub-No. 1181X), AB-55 (Sub-No. 551X), and
AB-290
(Sub-No. 194X), the requests for public use conditions are granted, and each
exempted
abandonment is subject to the condition that the appropriate railroad (CRC,
CSXT, or NW, as
appropriate) leave intact all of the rights-of-way underlying the tracks,
including bridges, trestles,
culverts, and tunnels (but not tracks, ties, and signal equipment), for a
period of 180 days from
August 22, 1998, to enable any State or local government agency, or other
interested person, to
negotiate the acquisition of the lines for public use.(266)

75. In STB Docket Nos. AB-167 (Sub-No. 1181X), AB-55 (Sub-No. 551X),
and AB-290
(Sub-Nos. 194X, 196X, and 197X): a formal expression of intent to file an OFA
under 49 CFR
1152.27(c)(1) or (c)(2), as appropriate, to allow rail service to continue must
be received by the
appropriate railroad(s) and the Board by July 31, 1998; and the OFA must
be received by the
appropriate railroad(s) and the Board by August 21, 1998, subject to time
extensions authorized
under 49 CFR 1152.27(c)(1)(i)(C) or (c)(2)(ii)(C), as appropriate.
The offeror must comply with
49 U.S.C. 10904 and must also comply with 49 CFR 1152.27(c)(1) or (c)(2),
as appropriate.
Each OFA must be accompanied by a $1,000 filing fee. See 49 CFR
1002.2(f)(25). OFAs and
related correspondence to the Board must refer to the appropriate proceeding by
docket number,
and the following notation must be typed in bold face on the lower left-hand
corner of the
envelope: "Office of Proceedings, AB-OFA". Provided no OFA
has been received, the
exemptions in STB Docket Nos. AB-167 (Sub-No. 1181X), AB-55 (Sub-No.
551X), and AB-290 (Sub-Nos. 194X, 196X, and 197X) will be effective on Day One
(unless stayed pending
reconsideration). Petitions to stay the exemptions in STB Docket
Nos. AB-167 (Sub-No. 1181X), AB-55 (Sub-No. 551X), and AB-290
(Sub-Nos. 194X, 196X, and 197X) must be
filed by July 31, 1998, and petitions to reopen must be filed by August 12,
1998.

76. With respect to each abandonment exempted in STB Docket
Nos. AB-167 (Sub-No.
1181X), AB-55 (Sub-No. 551X), and AB-290 (Sub-Nos. 194X and 196X), the
appropriate
railroad (CRC, CSXT, or NW, as appropriate) shall file, pursuant to the
provisions of 49 CFR
1152.29(e)(2), a notice of consummation with the Board to signify that it has
exercised the
authority granted and fully abandoned the line. If consummation has not been
effected by the
filing of a notice of consummation by July 24, 1999, and there are no legal or
regulatory barriers
to consummation, the authority to abandon will automatically expire. If any
legal or regulatory
barrier to consummation exists at the end of the 1-year period that begins on
July 23, 1998, the
notice of consummation must be filed not later than 60 days after satisfaction,
expiration, or
removal of the legal or regulatory barrier.(267)

77. The labor protective conditions set forth in New York Dock Ry.
-- Control --
Brooklyn Eastern Dist., 360 I.C.C. 60, 84-90 (1979), aff'd sub
nom.New York Dock Ry. v.
United States, 609 F.2d 83 (2d Cir. 1979), will apply to: (1) the
authority granted in STB
Finance Docket No. 33388 for (a) the acquisition and exercise by CSX and NS of
control, joint
control, and common control of CRR, CRC, NYC, and PRR, (b) the NYC/PRR
assignments, (c)
the entry into and performance of operating agreements for Allocated Assets and
Shared Assets,
and (d) the transfer of the Streator Line to NS; (2) the line transfer exempted
in STB Finance
Docket No. 33388 (Sub-No. 24); and (3) the control transaction approved in
STB Finance
Docket No. 33388 (Sub-No. 26).

78. The labor protective conditions set forth in Mendocino Coast Ry.,
Inc. -- Lease and
Operate, 354 I.C.C. 732 (1978), as modified in Mendocino Coast Ry.,
Inc. -- Lease and Operate,
360 I.C.C. 653 (1980), will apply to the authority granted in
STB Finance Docket No. 33388 for
the operation by CSX and NS of track leases with other rail carriers to which
Conrail is a party.

81. All conditions that were requested by any party in the
STB Finance Docket
No. 33388 proceeding and/or in the various embraced proceedings but that
have not been
specifically approved in this decision are denied.

82. As respects certain procedural matters not previously addressed: (a)
the ARU-6
petition filed July 18, 1997, by ARU is denied; (b) the CDB-1 comments filed
October 22, 1997,
by Charles D. Bolam are accepted for filing and made part of the record;
(c) the comments filed
November 26, 1997, by Durham, respecting the North Jersey SAA operating plan,
are accepted
for filing and made part of the record; (d) the NITL-10 motion filed January
13, 1998, by NITL
is granted, and the NITL-11 pleading (also filed January 13, 1998) is accepted
for filing and
made part of the record; (e) the RWCS-5 motion filed February 26, 1998, by RWCS
is granted,
and the RWCS-4 brief (also filed February 26, 1998) is accepted for filing and
made part of the
record; (f) the STW-5 motion filed February 26, 1998, by STWRB is granted, and
the STW-4
brief (also filed February 26, 1998) is accepted for filing and made part of
the record; (g) the
NYAR No. 4 motion filed March 19, 1998, by NYAR is granted, and the NYAR
No. 4 reply is
accepted for filing and made part of the record; (h) the CE-12 motion filed May
26, 1998, by
Consumers is denied, and the verified statement attached thereto is rejected;
(i) the GWWR-5
motion filed May 28, 1998, by Gateway is denied; (j) the letter filed May 29,
1998, by NYCH is
denied in part (insofar as it amounts to a request for leave to file a reply to
the brief filed
February 23, 1998, by the Nadler Delegation) and is rejected in part (insofar
as it amounts to a
reply to the brief filed February 23, 1998, by the Nadler Delegation); and
(k) the Wyandot-6
pleading filed June 16, 1998, by Wyandot is denied, insofar as that pleading
constitutes a motion
to strike.

Our job in assessing rail mergers is to balance a variety of factors and
issue a decision
that advances the public interest. The decision we are issuing today, which
approves with
conditions the Conrail merger application, will advance the public interest in
many important
ways. The application promotes competition, and our decision applies the
authority of the Board
to enhance competition even further.

The Strength of the Merger Application. The merger application we
are approving today,
as enhanced by the many conditions we are imposing, will result in a
procompetitive
restructuring of railroad service throughout much of the Eastern United
States. When the hard
work is done, and this complex transaction is fully consummated, both CSX and
NS will provide
vigorous, balanced, and sustainable competition, each over approximately 20,000
miles of rail
line in the East.

Most notably, CSX and NS are prepared to aggressively compete with each
other in many
important markets where Conrail now faces limited or no competition from other
major railroads.
Shippers will benefit from new head-to-head rail competition within shared
assets areas and joint
access areas. And this merger will enhance competition for many localities
outside of these areas
as well. In Buffalo, for example, while not every shipper will have direct
service by two carriers,
the transaction will create a two-carrier presence that will benefit shippers;
and CSX's activities
in the New York City area will face more competitive discipline than Conrail's
do now, from the
nearby presence of the New Jersey shared assets area. Finally, this
transaction will enable both
CSX and NS to compete more effectively with motor carrier service, which is a
dominant mode
of freight transportation throughout the East.

In short, shippers throughout the East will have more transportation
options than they
have had in decades. And they will have more competitive service, at
reasonable rates, than they
have ever had before.

Additionally, the transaction, when it is fully in place, will have a broad
positive
economic effect. It will produce an impressive $1 billion annually in
quantifiable public benefits
and numerous other benefits. The capital that will be invested in expanded
rail infrastructure will
benefit all shippers, not just those that are served by the applicants, and it
will create new jobs
both on and off of the rail system. The support of more than 2,200 shippers
from a broad
spectrum of commodity groups, 350 public officials, 80 railroads, many state
and local
government interests throughout the East, and various rail labor employees
attests to the overall
strength of the proposal.

This merger will promote competitive balance throughout an entire region of
the country.
And it will create a strong rail network in the East that can handle the
transportation needs of an
expanding economy and advance important economic growth and development in the
region.
These benefits clearly and significantly advance the public interest.

Preservation of the Fundamental Integrity of the Transaction. Our
decision, while
imposing important additional procompetitive conditions, recognizes the
operational and
competitive integrity of the proposal and the importance of preserving and
promoting privately
negotiated agreements. Government should not be in the business of
fundamentally restructuring
private-sector initiatives that are inherently sound, and the conditions that
we are imposing add
value, but not in a way that undermines the transaction itself. They reflect a
respect for the
carefully crafted structural soundness of the merger proposal, including its
shared assets and joint
access areas, and for the numerous settlement agreements that we encouraged and
that the
applicants and the other parties have worked hard to reach -- agreements like
the National
Industrial Transportation League (NITL) settlement, the United Transportation
Union (UTU) and
Brotherhood of Locomotive Engineers settlements, the Cleveland area
environmental
settlements, and so many more. These private-sector agreements have clearly
added value to the
transaction that was initially proposed, from a competitive perspective and in
other ways, and the
parties are to be commended for furthering the public interest in this way.
There is a strong
public interest in encouraging private parties to negotiate procompetitive
transactions such as this
one, and government action that discourages such private-sector initiative is
not in the public
interest.

The Procompetitive Use of the Board's Authority. While our decision
preserves the
strength and integrity of the proposal, it also applies the Board's authority
fully and reasonably to
further promote competition to the benefit of many geographic regions. The
additional
conditions, which go beyond the already regionally procompetitive effect of the
original
transaction and the further procompetitive effect of the many settlements,
enhance the railroad
alternatives for areas in New York State and New England that had lost carrier
options through
the creation of Conrail.

Our decision also applies the Board's authority to further enhance the
positions of many
users. Our decision imposes the NITL settlement and expands in a logical way
the
procompetitive aspects of that settlement. By giving shippers the opportunity
to exercise any
antiassignment clauses or other similar provisions in their existing contracts
after 6 months
following the division of Conrail's assets, our decision preserves the
operational integrity of the
transaction, but still gives those shippers, including many chemical, coal, and
intermodal
shippers, the opportunity to use the contract terms they have bargained for to
take advantage of
their new competitive options sooner rather than later. By preserving the
settlements of many
railroads and shippers such as coal and utility shippers, while imposing
conditions to assist
others such as aggregates shippers, and smaller railroads that provide
important services, our
decision ensures that, overall, shippers will be better off after the merger
than they were before,
and that none will have less service than they had before.

In this regard, our decision recognizes the important role of smaller
railroads in providing
essential and competitive services in various regions affected by this
transaction. By assuring
that smaller railroads that provide essential services in such areas as the
Ohio region and New
England will remain viable and will continue to be able to compete, the
conditions promote
important competitive options and further regional economic development.

Operational and Implementation Success. Our decision, with its
significant operational
reporting and monitoring, recognizes the operational challenges that the
transaction presents. Its
monitoring elements will provide the Board with the tools to further a smooth
implementation of
the merger in a way that utilizes the Conrail Transaction Council and the Labor
Task Forces and
does not unduly burden the parties. And it appropriately focuses on specific
areas of concern,
such as the shared assets areas and the Chicago gateway. Having been given the
personal
commitment of the Chief Executive Officers of both applicant railroads to make
the merger
work, I am confident that this merger will be implemented smoothly and will
result in overall
service improvements in relatively short order. The conditions we are
imposing, however, will
make sure that we are on top of the situation in case it does not.

Protection of the Environment. Our decision appropriately protects
the environment.
The transaction has many environmental benefits, including the anticipated
removal of over

1 million truck trips a year from our Nation's highways. At the same time,
the proposal raised
environmental concerns. In response, for the first time ever in a merger, the
Board issued a full
environmental impact statement. We also have encouraged the railroads and
local communities
to meet and attempt to address issues privately, and several have been able to
successfully
resolve their concerns. In Cleveland, for example, a key traffic center for
this merger, the parties,
after months of discussion, have reached mutually acceptable agreements that
preserve the
operational integrity of the transaction while addressing important community
life concerns. I
am pleased that we are able to give effect to win-win settlements such as this
one, and others in
the area surrounding Cleveland and in so many other places. At the same time,
for the
communities that could not reach agreement with the carriers, our decision does
provide
necessary and appropriate conditions pertaining to grade-crossing safety,
hazardous materials,
traffic delay and noise, among others. And, with the recommended mitigation
that the applicants
have agreed to carry out, the transaction will not have, and cannot be viewed
as having, a
disproportionately high and adverse impact on minority and low-income areas.

The Promotion of Safety. Our decision clearly promotes safety.
More than half of the
environmental conditions involve safety. For the first time ever in a merger,
the applicants were
required to submit safety integration plans. And, as part of the merger
implementation oversight,
the implementation of these plans will be carefully monitored through a
memorandum of
understanding between the Board and the Department of Transportation, which
clearly represents
a cooperative governmental initiative in the public interest.

Recognition of Employee Interests. As previously discussed, the
proposal before us will
mean more jobs overall in the long run. And, by adopting the UTU proposal in
mandating the
creation of Labor Task Forces to focus on issues such as safety and operations,
our decision will
help promote safety and quality of life for employees. Also, our decision
provides the
protections of New York Dock, and it reaffirms the negotiation and
arbitration process as the
proper way to resolve important issues relating to employee rights. Thus, the
Board has made
clear in its decision, as requested by rail labor, that the Board's approval of
the application does
not indicate approval or disapproval of any of the involved CBA overrides
that the applicants
have argued are necessary.

Overall Benefits. The package we are approving should clearly
promote the public
interest. The original transaction, with its subsequently negotiated
agreements, and with the
conditions we are imposing, will provide many benefits to many people. The
extensive oversight
and monitoring will help us to ensure that these benefits will materialize, and
the private
mechanisms in place for oversight will provide a vehicle by which the important
and constructive
private-sector dialogue, initiated prior to the Board's decision today among
the applicants, other
railroads, shippers, employees, and affected communities, can continue.

Our decision promotes private-sector initiatives that are in the public
interest and
represents good, common sense government. It provides a resolution that is
best for the national
interest at large, and for the East in particular. Approval of this merger as
conditioned is an
historic moment for the Board, for transportation, and for the Nation as a
whole.

VICE-CHAIRMAN OWEN, commenting:

Since 1920, it has been the public policy of this nation to encourage
railroad mergers that
are in the public interest. The "public interest" -- just what does that
expression mean? We are
instructed, via the statute, agency precedent, and the courts, that in the
context of a proposed
merger, that expression should mean competition and improved rail service for
shippers. For
railroads, it should mean growth, better returns on investments, more efficient
use of assets, and
infrastructure improvements. For labor, it should mean fair working conditions
and wages, and
enhanced job security. And last, but not least, for impacted communities, it
should mean fair and
equitable arrangements affecting the environment and the quality of life.

I find that, in the context of this proposed merger and in view of the
quality of the
arguments and evidence, this is indeed a proposed merger in the public
interest. I vote to
approve it.

In my opinion, this merger, as approved and conditioned, reasonably
approximates what
was envisioned, as far back as the Final System Plan, as viable two-carrier
competition in the
East. Overall, as approved, this transaction will have substantial
procompetitive results.

I believe that the public overall should be pleased as a result of what we
do here today.
Conrail has been replaced by two viable, efficient, and quality carriers, who
promise to compete
vigorously. Such competition cannot help but enure to the public benefit and
interests.
Concomitantly, the nation's communities and highways will benefit from the
removal of many
thousands of trucks from the nation's highways.

Is it a perfect plan? Perhaps not. Will there be some competitive
harm, or dislocation?
Maybe, but only time will tell. I find on balance, however, the evidence
compelling that the
approval of this merger, as conditioned by the Board's decision, will ease, and
in some cases
completely eliminate the harm of a competitive imbalance in many parts of the
East that has gone
on for far too long.

I am thankful that the debate consisted of many diverse views. But I
believe that what we
do here today will in the long run achieve the greatest good with a minimum
amount of harm. In
this regard, I would commend the applicants and the National Industrial
Transportation League,
and the United Transportation Union, among others, for sitting down at the
table in advance of
these proceedings, pursuing meaningful dialogue, and reaching exceptional and
novel
resolutions. That was truly an example of the private market place regulating
itself better than
any governmental body could do.

I would also commend the role of other federal agencies, such as the FRA in
matters of
safety, and DOT and DOJ for their valuable input regarding some of the
competitive and
operational issues, in advancement of the process.

We prescribe here today carefully crafted economic, operational, and
environmental
conditions designed, on balance, not only to enhance further the competitive
and public benefits
of this merger, but also to enhance the Board's ability to recognize and cure
potential problems
in the merger's future implementation.

Accordingly, let me stress to the skeptics, that this agency intends on
being an alert watch
dog. The Board will not hesitate for a moment to exercise its authority to
impose additional
competitive, operational, and environmental relief when necessary. As such, I
will hold the
applicants to their promises and commitments.

Lastly, I would be remiss if I did not take a moment here to thank the
Board's Staff. I
must admit, I came here from the private sector 3 years ago with some of the
same negative
stereotypical perceptions of civil servants shared by others. However, I am
here to tell you that
the civil servants here at the STB, at least, are some of the most dedicated,
talented, and
committed found anywhere in the federal workforce. This agency possesses some
of the finest
and competent transportation specialists in the world. I thank them all --
the merger team, the
Chairman and her staff, and, last but not least, my staff, for fulfilling their
responsibilities in the
highest tradition of excellence.

ANN ARBOR RAILROAD. AA, a Class III railroad, operates
over approximately 46 miles of
main line track and 31.44 miles of yard and side tracks between Ann Arbor, MI,
and Toledo, OH.(280) AA,
which has four direct Class I connections (Conrail at Toledo and
Ann Arbor; NS at Toledo and Milan;
CSX at Toledo; and CN at Toledo),(281) claims
that it offers its shippers nondiscriminant access to its Class
I connections, and AA adds that the existence of these competitive connections
has kept AA viable. AA
contends: that its traffic base consists of nearly 50% bulk traffic and a
little over 50% automotive traffic;
that there is no intermodal competition for the bulk traffic; that the
automotive traffic, however, will
move by rail only so long as there is reliable and efficient service; and that
such service can only be
maintained by intra-rail competition.

Competitive access to Chicago, AA maintains, is critical. AA claims that
only two of its four
Class I connections (Conrail and NS) from/to Chicago are efficient and that its
other Class I connections
(CSX and CN) cannot provide competitive routings from/to Chicago. (1) AA
claims that the
AA/TSBY/CSX routing (via Howell) and the AA/TSBY/CN routing (via Durand) are
too circuitous and
would also involve an additional carrier. (2) AA claims that the
AA-Toledo-CSX routings, via either
Deschler, OH, or Fostoria, OH, are too circuitous. (3) AA claims that the
AA-Toledo-CN routing, via
Port Huron, MI, is even more circuitous than the other alternative routings.

The CSX/NS/CR application envisions that Conrail's Chicago-Kalamazoo-Ann
Arbor and
Chicago-Elkhart-Toledo lines will be assigned to NS. AA contends, in essence,
that, as respects traffic
moving from/to Chicago, it is a 2-to-1 shortline because the Conrail vs. NS
competition that exists pre-transaction will cease post-transaction, and the
AA/NS routing will become AA's only efficient routing
for traffic moving from/to Chicago. AA concedes that the primary application
also envisions new
competitive routings for CSX, but these new routings, AA insists, will be of no
use as respects
Ann Arbor-Toledo traffic moving from/to Chicago.(282) AA also notes that CP is reported to have
received, in a settlement with NS, certain rights to operate over (at least a
portion of) Conrail's Chicago-Kalamazoo-Ann Arbor line. AA insists, however,
that it has been informed that the rights provided for
in the NS/CP settlement will not permit an AA/CP interchange at Ann Arbor.

AA fears that, without appropriate conditions, it stands to lose
approximately 42% ($3,000,000)
of its annual revenues. The loss of these revenues, AA warns, would have a
devastating effect on AA,
would require AA to reduce the level of its current service and to stop service
to some customers
altogether, and would impair AA's ability to perform essential services on its
line. The effect, AA adds,
would also be devastating to at least some AA-served shippers.

AA therefore asks that we require: that AA be granted "limited trackage
rights" between
Chicago and Toledo over the Conrail Chicago-Elkhart-Toledo line to be assigned
to NS;(283) and that AA
be permitted to interchange traffic with CP at Ann Arbor. AA also asks that we
retain jurisdiction to set
compensation and other terms in the event the parties are unable to resolve
these matters through
negotiations. (1) AA contends that its Chicago-Toledo trackage rights
condition, by giving AA an
alternative routing for traffic moving from/to Chicago, would allow AA: to
preserve intramodal
competition; to retain some traffic that would otherwise be diverted; and to
attract new traffic to offset
the remaining losses. (2) AA contends that its Ann Arbor interchange condition
would allow AA to
divert, to rail, certain automotive traffic that now moves by truck from Toledo
to the Detroit-Windsor
area. (3) AA contends that the conditions it seeks, by allowing AA to retain
existing traffic and to attract
new traffic, would enable AA to recoup its projected revenue losses, and would
thereby allow AA to
continue to provide essential services on its Ann Arbor-Toledo line.(284)

ASLRA & RRA. The American Short Line Railroad
Association (ASLRA) and Regional
Railroads of America (RRA), which claim that the CSX/NS/CR transaction will
have substantial impacts
on the more than 270 shortlines and regionals that presently have direct
connections to CSX, NS, and/or
Conrail, ask that we impose certain conditions. (1) ASLRA and RRA ask
that we require CSX and NS to
adopt existing inter-carrier agreements between Conrail, on the one side, and
connecting shortlines and
regionals, on the other side, and to apply those agreements, without
modification except by mutual
consent of the parties. (2) ASLRA and RRA ask that we require that existing
gateways and rate
relationships between CSX, NS, and Conrail, on the one side, and connecting
shortlines and regionals, on
the other side, be maintained until changed by mutual consent. (3) ASLRA
and RRA ask that we
consider expanded shortline and regional connections and access as a possible
solution to competitive or
operational problems that we identify during our review of the CSX/NS/CR
transaction. (4) ASLRA and
RRA ask that we clarify, as a matter of policy, that the rail system should be
truly inter-active, by which
is meant: (i) that, at junctions and terminal areas served by both CSX
and NS, small railroads should
have rights to interchange with both as well as with each other; and (ii) that
artificial barriers that
arbitrarily restrict full interchange rights should be discouraged.
(5) ASLRA and RRA ask that, to ensure
that CSX and NS do not use their market power to disadvantage small railroads,
or shippers or receivers
located on small railroads, we retain jurisdiction over inter-carrier
relationships between CSX and NS, on
the one side, and connecting shortlines and regionals, on the other side. (6)
ASLRA and RRA ask that,
to provide a forum for investigation and resolution of post-transaction
competitive or service-related
complaints by small railroads, or by shippers or receivers located on small
railroads, we: (i) provide for
continuing oversight for a period of 5 years after the effective date of the
CSX/NS/CR transaction; and
(ii) require periodic reporting of operational and service data by CSX and
NS. (7) ASLRA and RRA ask
that, at the conclusion of the 5-year oversight period, we include specific
data and actions in our post-transaction study of the impact of the CSX/NS/CR
transaction on small railroads in the affected service
area.

BOSTON AND MAINE. B&M opposes the suggestion, which
it attributes to the State of
Rhode Island, that, to allow for the creation of an NS/P&W interchange (at
Gardner, MA), NS should be
granted trackage rights over B&M's lines (apparently between Mechanicville,
NY, and Gardner, MA).(285)

CANADIAN NATIONAL. CN, which operates a 1,000-mile rail
network in the United States
(in Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin) and a
transcontinental rail network in
Canada, contends that, if we impose any conditions relating to the
Buffalo/Niagara Falls area, we should
ensure that any such condition affords equitable treatment to all rail carriers
serving that area.

DURHAM TRANSPORT. Durham, a Class III railroad that
operates within the Raritan Center
Industrial Park (Raritan Center) in Edison, NJ, claims: that the lead tracks
within Raritan Center are
operated by Durham, which conducts such operations pursuant to an easement
granted by the owners of
Raritan Center, and which interchanges traffic with Conrail at Lower Yard; but
that the maps submitted
with the primary application indicate that all lead tracks within Raritan
Center are part of the North
Jersey SAA. Durham concedes that the maps submitted with applicants' North
Jersey SAA operating
plan do not indicate that the lead tracks within Raritan Center are part of the
North Jersey SAA. Durham
notes, however:(286) that the relevant map,
and the related narrative material, contain no references of any
kind to Raritan Center; and that the yard switching assignments anticipated by
applicants, see CSX/NS-119 at 99-100, make no reference to a
Conrail/Durham interchange. Durham notes that applicants'
Metuchen map, see CSX/NS-119 at 98, shows a track 215 extending south to
Raritan Junction. Track
215, according to Durham, proceeds south across U.S. 1 and the New Jersey
Turnpike and terminates at
Woodbridge Avenue, at which point the track number changes to 223 and becomes
the GSA Lead; and
the GSA Lead, Durham adds, extends into Raritan Center. Durham claims that the
CSX/NS-119
material, although incomplete and therefore ambiguous, suggests that the
post-transaction Conrail will
continue operations out of Metuchen Yard over the 215-223-GSA Lead track in
order to reach shippers
located on the Raritan Industrial Track both east and west of Raritan Center.
Durham further contends
that, because two carriers (Conrail and Durham) will be operating on the GSA
Lead post-transaction,
their operations will necessarily have to be coordinated, especially in view of
the fact that much of the
freight transported by Conrail through Raritan Center and over the GSA Lead
will consist of chemicals
and other hazardous materials. Durham therefore asks that we require the
post-transaction Conrail to
enter into an appropriate agreement governing the coordination of rail
operations over the GSA Lead and
the designation of crew assignments. Such an agreement, Durham notes, will
ensure the preservation of
interchange operations at Lower Yard.

Durham, in its brief filed February 23, 1998, claims: that applicants, in
a letter received by
Durham on December 5, 1997, acknowledged the inaccuracy of the Conrail System
Map and stated that
they would honor Durham's Interchange Agreement with Conrail;(287) that, however, applicants, in their
letter, failed to address Durham's request for a trackage agreement for the
joint use of the GSA Lead
(track 223); that, by letter dated December 11, 1997, Durham requested that
applicants negotiate such an
agreement;(288) that, however, applicants have
not responded to this letter; and that applicants, in their
rebuttal submission of December 15, 1997, did not address Durham's
condition request.(289) Durham
accordingly renews its request that we condition approval of the CSX/NS/CR
transaction upon the
negotiation by applicants and Durham of a satisfactory joint use agreement for
the use of the GSA Lead
Track. Durham insists that joint use of the GSA Lead within the Raritan
Industrial Park is not presently
addressed in any of the interchange or other agreements between Durham and
Conrail and, accordingly,
requires an agreement between Durham and the SAA operator.

GATEWAY WESTERN AND GATEWAY EASTERN. Gateway's interests
in this
proceeding(290) are focused upon two sets of
trackage rights pursuant to which Conrail operates over
portions of Gateway's lines. (1) The Cahokia trackage rights, which Conrail
received in a 1988
agreement with the bankruptcy trustee of the Chicago, Missouri & Western
Railroad Company (CMW, a
previous owner of the GWWR line), permit Conrail to operate its trains between
East St. Louis and
Sauget, IL, via trackage rights over: GWWR from Missouri Avenue to Trendley
Avenue; TRRA from
Trendley Avenue to M&O Junction;(291) and
GWWR from M&O Junction to the Cahokia Marine
Terminal. Conrail is allowed to use the Cahokia trackage rights for the sole
purpose of accessing the
Cahokia Marine Terminal. (2) The Willows trackage rights, which Conrail
received in a 1994 agreement
with GWER, permit Conrail to operate its trains over GWER's line in
East St. Louis between the east
interlocking limits of "Willows" (MP 236.8±) and the TRRA connection at
"Q" (MP 238.7±). Conrail is
allowed to use the Willows trackage rights for bridge traffic only.(292)

The CSX/NS/CR application envisions that Conrail's lines and rights in the
East St. Louis area
will be assigned to CSX, and Gateway is concerned that the introduction of CSX
trains, and unit coal
trains in particular, on the Willows/Cahokia segments will substantially impair
Gateway's ability to
handle its own traffic on those segments. Congestion, Gateway indicates, is
not a major problem today
because Conrail, with its limited market coverage, moves only a limited number
of trains across the two
segments. Gateway warns, however, that, given CSX's much greater market
coverage, an assignment to
CSX may result in a drastic expansion of the use of the two segments. Gateway
adds that its dispatching
control of the Willows/Cahokia segments will not enable it to resolve the
operational problems posed by
the introduction of large numbers of CSX trains.

In the STB Finance Docket No. 33388 lead docket, applicants have requested
that we issue a
declaratory order that, by virtue of 49 U.S.C. 11321(a), CSX and NS will
have, post-transaction, the
same authority to conduct operations over the routes of Conrail covered by
certain "Trackage
Agreements" that Conrail has pre-transaction, notwithstanding any clause in any
such agreement
purporting to limit or prohibit unilateral assignment by Conrail of its rights
thereunder. The declaratory
order applicants seek would confirm that, despite the provisions in the
Cahokia/Willows trackage rights
agreements (TRAs) that purport to bar unilateral assignment of Conrail's
rights,(293) CSX will be Conrail's
successor-in-interest with respect to the Cahokia/Willows trackage rights, and
will have the same
Cahokia/Willows trackage rights that Conrail had.

Gateway, which does not consent to the assignment of Conrail's
Cahokia/Willows trackage rights
to CSX, asks that we hold: (1) that, on account of Gateway's refusal to
waive the provisions barring
unilateral assignment of Conrail's Cahokia/Willows trackage rights, CSX will
not be Conrail's successor-in-interest with respect to these rights; and
(2) that CSX will be allowed to operate on the
Cahokia/Willows segments if, but only if, it receives trackage rights on such
segments (a) in negotiations
with Gateway, and/or (b) in a 49 U.S.C. 11102 terminal trackage rights
proceeding. Gateway argues:
that sec. 11102 provides the only means by which one railroad can be
compelled to open its terminal
tracks to access by another;(294) and that CSX
has made, in the present proceeding, no showing that its use
of the Cahokia and Willows segments is justified under the terms of
sec. 11102.(295) Gateway also argues
that, even if sec. 11321(a) provides a means by which Gateway can be compelled
to open its
Cahokia/Willows tracks to CSX, CSX has not demonstrated that an override of the
provisions in the
Cahokia/Willows TRAs that bar unilateral assignment is "necessary" to allow CSX
to carry out the
CSX/NS/CR transaction.(296)

Gateway also contends that, if we hold that sec. 11321(a) authorizes an
override of the
provisions in the Cahokia/Willows TRAs that bar unilateral assignment, we
should go further and hold
that this override applies to all provisions in these TRAs. The holding urged
by Gateway would
substitute CSX for Conrail as the trackage rights tenant on the Cahokia/Willows
segments, but would
also require the terms and conditions applicable to the Cahokia/Willows
trackage rights to be negotiated
by Gateway and CSX or, if negotiations fail, to be set by the Board. Gateway
argues, in essence: that
the limited override sought by CSX would result in unbalanced agreements that
neither Gateway nor its
predecessor would ever have negotiated and that no regulatory agency would ever
have imposed; and
that a complete override would allow Gateway to protect its interests by
negotiating, or by asking this
agency to impose, balanced agreements that reflect the expanded use of the
trackage rights that may
occur with the substitution of CSX for Conrail.(297)

HOUSATONIC RAILROAD COMPANY. HRRC, a Class III railroad
that operates over
approximately 161.3 miles of track in Massachusetts, Connecticut, and New York,
has two lines that
connect at Danbury, CT: a north-south line, that extends between Pittsfield,
MA, and Danbury, CT; and
an east-west line, that extends between Beacon, NY, and Derby, CT. HRRC, which
interchanges all of
its traffic (approximately 5,000 inbound cars and 750 outbound cars a year)
with Conrail at Pittsfield,
contends that the CSX/NS/CR transaction, which will substitute CSX for Conrail
as HRRC's Pittsfield
connection, will adversely impact HRRC and/or its shippers in five ways: (1)
1-to-1 shippers on HRRC's
lines will be competitively disadvantaged vis-à-vis their 1-to-2
competitors; (2) for those shippers on
HRRC's lines that ship to points open today to both CSX and NS, the neutral
gateway service provided
pre-transaction by Conrail will not be provided post-transaction by CSX; (3)
HRRC shippers of freight
moving from/to Conrail points that will be served post-transaction by NS (and
not by CSX) will be
competitively disadvantaged by the substitution of a possibly more costly
three-carrier routing
(HRRC/CSX/NS) for what is now a two-carrier routing (HRRC/Conrail);
(4) the new intramodal
competition west of the Hudson will allow for the development of new intermodal
competition east of
the Hudson, which will divert traffic from all New England shortlines but
particularly (because of
location) from HRRC; and (5) whereas Conrail has honored its "partnership"
commitments to HRRC,
CSX will not continue the pre-transaction HRRC/Conrail partnership.(298)

To protect HRRC and its on-line shippers from the anticompetitive impacts
that will result from
the CSX/NS/CR transaction, to increase intramodal competition in the territory
served by HRRC, and to
preserve the essential services provided by HRRC, HRRC asks that we impose
three conditions: an
access condition; a "single-line to joint-line" (SL-to-JL) condition; and
a rate condition.

Access Condition. (1) In its comments filed October 21, 1997,
HRRC asks that we require that
NECR be granted trackage rights between Palmer, MA, and Albany, NY (including
Selkirk, NY, and
Mechanicville, NY). HRRC notes that these trackage rights, combined with an
HRRC/NECR
commercial arrangement that HRRC expects to negotiate, would enable HRRC to
interchange traffic
with NS, CP, and B&M in the Albany area. HRRC also states, in its
comments, that, if we do not require
that NECR be granted the Palmer-Albany trackage rights sought by NECR, we
should, at the very least,
require that CSX enter into a haulage arrangement with HRRC, under the terms of
which CSX would
haul HRRC's traffic over Conrail's Albany-Boston line (1) between Pittsfield
and Albany, for the purpose
of interchange in the Albany area with, among other carriers, NS, CP, and
B&M, and (2) between
Pittsfield and Palmer, for the purpose of interchange with connecting carriers
at Palmer and intermediate
points.

(2) In its brief filed February 23, 1998, HRRC makes no mention of its
trackage rights condition
but asks that we require that CSX enter into a haulage arrangement with HRRC,
under the terms of
which CSX would haul HRRC's traffic over Conrail's Albany-Boston line (1)
between Pittsfield and
Albany, for the purpose of interchange in the Albany area with, among other
carriers, NS, CP, and B&M,
and (2) between Pittsfield and Palmer, for the purpose of interchange with
connecting carriers at Palmer
and intermediate points. HRRC also asks that we retain jurisdiction to
establish an appropriate haulage
fee.

SL-to-JL Condition. HRRC, noting that the NITL agreement provides
limited 3-year rate
protection for certain SL-to-JL movements, asks that we make this protection
applicable to movements
originating on HRRC. HRRC is asking, in essence, that we clarify that the
"single line Conrail"
movements covered by section III(E) of the NITL agreement include the
HRRC/Conrail movements of
interest to HRRC. See HRRC-13 at 6-7.

Rate Condition. HRRC asks that we require CSX to fulfill its
commitments: (i) that all rate
arrangements binding on Conrail will be honored by CSX for their duration;(299) and (ii) that, with respect
to public group-to-group or mileage scale rate documents, rates to HRRC
stations will be the same as
rates to CSX local stations within that same group.(300)

I&M RAIL LINK. I & M Rail Link, LLC
(I&M), a Class II railroad, operates over
approximately 1,386 miles of rail line connecting Minneapolis/St. Paul,
MN, Kansas City, KS, and
Chicago, IL. I&M's interests in this proceeding are focused upon
intermediate switching services in the
Chicago switching district. I&M contends that there are today, in that
district, only two intermediate
switching carriers (i.e., only two carriers whose primary focus is on the
movement of traffic from one
railroad to another): Indiana Harbor Belt Railway (IHB) and The Belt Railway
Company of Chicago
(BRC). IHB is presently owned 51% by Conrail; the primary application
envisions that this 51% interest
will be retained by Conrail; and thus, post-transaction, IHB will be subject to
joint control by CSX and
NS.(301) BRC is presently owned 25% by CSX,
8.33% by NS, and 16.67% by Conrail; the primary
application envisions that NS will acquire Conrail's stock; and thus,
post-transaction, CSX and NS will
each have a 25% ownership interest.(302)
I&M is concerned that, post-transaction, the only two
intermediate switching carriers in the Chicago switching district will be
controlled or dominated by CSX
and NS,(303) and that IHB will cease to be an
intermediate switching carrier and will become instead an
operating adjunct of CSX and NS (particularly of CSX, which will have
dispatching authority over IHB).

I&M therefore asks that we require Conrail to sell its 51% IHB
ownership interest to a
"coalition" of interested carriers that, at the present time, consists of
I&M alone.(304) I&M contemplates
that IHB would continue to operate under its own management, and would control
its own dispatching,
serve on-line shippers from its own yards, and market its own services as an
independent carrier. I&M
contends that divestiture of Conrail's 51% ownership interest in IHB is
necessary: to prevent an
anticompetitive concentration of ownership and control of intermediate
switching services and related
terminal services in the Chicago switching district; to establish IHB as a
neutral, independent switching
carrier; to assure that IHB is not operated as an extension of CSX; to preserve
essential switching
capacity in the Chicago switching district; and to preserve an efficient
connection at Chicago for I&M.(305)

ILLINOIS CENTRAL RAILROAD COMPANY. IC, a Class I railroad
that operates
approximately 2,624 route miles of rail line in Illinois, Kentucky, Tennessee,
Mississippi, Louisiana, and
Alabama,(306) asks that we impose two
conditions: a competitive routing condition and a line acquisition
condition.

Competitive Routing Condition. IC contends that there are today
three joint-line routings for rail
traffic moving between the South Central United States and Conrail territory in
the Northeast:
IC/Conrail;(307) CSX/Conrail; and NS/Conrail.
IC further contends that, post-transaction, there will be, for
this traffic, two joint-line routings (IC/CSX and IC/NS) and two single-line
routings (CSX and NS). IC
claims that its incentives will remain much the same post-transaction as they
are pre-transaction because
IC's participation in this traffic will continue to be on a joint-line basis
only. IC further claims, however,
that the incentives of CSX and NS will not be the same post-transaction because
each will have, post-transaction, both a single-line routing and a joint-line
routing; and IC believes that railroads, if at all
possible, almost invariably favor their single-line routings and almost
invariably seek to maximize their
portions of joint-line routings, no matter how efficient alternative joint-line
routings might be.

IC's interests in this proceeding relate to the preservation of its
post-transaction joint-line
routings (i.e., IC/CSX and IC/NS) for traffic moving between the south central
United States and Conrail
territory in the Northeast. IC's interests as respects the IC/NS routing have
been accommodated by an
agreement with NS, which has committed to retaining shipper options via IC/NS
gateways in Illinois. IC
claims, however, that it has been unable to reach a similar agreement with CSX,
and it is concerned that,
post-transaction, CSX will favor less efficient IC/CSX joint-line routings via
New Orleans and Memphis
and will decline to participate in more efficient IC/CSX joint-line routings
via Chicago, East St. Louis,
and Effingham.(308)

IC therefore asks that we require, except insofar as IC and CSX agree
otherwise: that, for traffic
moving to/from stations on lines of CSX and its shortline connections,(309) CSX must, upon request of a
shipper or IC, join with IC in market competitive joint rates via Chicago,
East St. Louis, and Effingham
"where the applicable joint line routes are reasonably efficient (distance
considered) and/or where a
competitive service package can be offered to the customer," IC-6 at 2; that,
in constructing joint rates
via IC, CSX's portion of such joint rates shall be at rate levels comparable on
a per mile basis with CSX's
revenue requirement via the portion of its preferred long-haul route between
the same origins and
destinations; that CSX's revenues shall be calculated by determining its
revenue per car mile (revenue
per car divided by CSX's route miles) over its preferred long-haul route (e.g.,
via New Orleans) and
multiplying such revenue per car mile by CSX's route miles for the routing via
IC (e.g., via Effingham);
and that any absorbed switching charges or other unusual terminaling costs
shall be added to this
calculation. This competitive routing condition, IC contends, is necessary to
assure that traffic moving
between the south central United States and Conrail territory in the
Northeast: has access to an IC/CSX
joint-line routing option as an alternative to a CSX single-line routing
option; and has access to an
IC/CSX joint-line routing option via an Illinois gateway as an alternative to
an IC/CSX joint-line routing
option via Memphis and/or New Orleans.

Line Acquisition Condition. An approximately 2-mile segment of
IC's Chicago-New Orleans
mainline (this segment is known as the Leewood-Aulon line) lies in or near
Memphis, TN, and extends
between CSX MP F-371.4 (IC MP 387.9) at Leewood and CSX MP
F-373.4 (IC MP 390.0) at Aulon.
Pursuant to an agreement dated January 22, 1907, and various amendments
thereto, IC currently operates
via trackage rights over the CSX-owned Leewood-Aulon line, both ends of which
connect with IC-owned portions of IC's Chicago-New Orleans mainline. The
double-track Leewood-Aulon line is an
essential link for nearly all north-south traffic moving on IC's rail system;
all traffic moving on IC's core
north-south trunk must traverse this 2-mile line in order to pass through
Memphis.(310) The Leewood-Aulon line is
operated over by IC, CSX, and UPRR (UPRR operates over the line for the limited
purpose
of handling interchange traffic to and from CSX's Leewood Yard, which is
located adjacent to the
Leewood end of the line). Of the three, however, IC is by far the predominant
user. The Leewood-Aulon line is, by IC's account, a secondary line for CSX; it
is located at the end of CSX's Memphis-Nashville route and is used by CSX
primarily for switching and the transfer of interchange traffic.

IC's grievance respecting the Leewood-Aulon line reflects the fact that the
line is owned, and
therefore dispatched, by CSX. IC's grievance respecting the line, the "number
one bottleneck on IC as a
scheduled service railroad," IC-6, V.S. McPherson at 17, also reflects the
additional fact that dispatching
on the line, which until December 1996 was handled by a CSX operator based at
Leewood, is now
handled by CSX's centralized dispatching center in Jacksonville, FL, using a
Traffic Control System
(TCS). IC claims: that, prior to the December 1996 transfer, train movements
on the Leewood-Aulon
line were, for the most part, effectively coordinated; that, however, since the
transfer, CSX has caused
significant interference with and delays to IC's through train movements on the
line; that CSX trains
have been held at length on the line; that yard movements at CSX's Leewood Yard
have often been
allowed to "foul" the line; and that repeated complaints to CSX dispatchers in
Jacksonville have not been
addressed. The result, IC contends, has been severe disruptions to IC's
operations in Memphis.

The CSX/NS/CR transaction, IC claims, will allow CSX, for the first time,
to compete directly
with IC for certain traffic, and, in particular, for traffic currently moving
in IC/Conrail joint-line service
via Effingham. IC concedes that the CSX chokehold on IC's operations in the
Memphis area predates the
CSX/NS/CR transaction, but IC insists that, if the transaction is implemented,
the anticompetitive effects
of this chokehold will grow more harmful. With the CSX/NS/CR transaction, IC
claims, CSX will have,
for the first time, a competitive incentive to utilize its chokehold to render
IC's service non-competitive
and to force traffic now routed IC/Conrail via Effingham to move over a CSX
routing via Memphis or
New Orleans.

IC therefore asks that we require that, under terms to be negotiated by IC
and CSX or, if
negotiations fail, to be set by the Board, CSX convey the Leewood-Aulon line to
IC, subject to: the
retention by CSX of trackage rights over the line sufficient to allow CSX to
continue all operations
which it conducts on the line today; the retention by CSX and IC of their
existing rights to serve local
shippers and industries on the line; and the retention by UPRR of the right to
continue its current usage
of the line. This condition, IC claims, would remove the chokehold that CSX
now has on IC's operations
in the Memphis area; it would thereby assure that IC can continue to offer
effective competition for
traffic to/from the Northeast; and it would preserve the basic operating
patterns that now exist on the
Leewood-Aulon line.(311)

INDIANA SOUTHERN RAILROAD. ISRR is a Class III railroad
with four Class I
connections(312) that operates in Indiana over
approximately 176 miles of track between Indianapolis and
Evansville. ISRR's interests in this proceeding are focused on rail traffic
moving from/to: Indianapolis,
Crawfordsville, Muncie, and Shelbyville, IN; and points on Conrail's
Indianapolis-Crawfordsville, -Muncie, and -Shelbyville lines. (1)
Indianapolis, a 2-to-1 point, is served today by Conrail (via its E. St.
Louis-Cleveland mainline) and CSX (via its Cincinnati-Indianapolis line, and
also via trackage rights
over Conrail's Indianapolis-Crawfordsville line). The CSX/NS/CR application
envisions the assignment
to CSX of Conrail's E. St. Louis-Cleveland mainline and its
Indianapolis-Crawfordsville line. The
CSX/NS/CR application, however, also envisions: that NS will serve 2-to-1
shippers at Indianapolis via
trackage rights over CSX from both Muncie and Lafayette, IN; that NS will
occupy Conrail's tracks at
Hawthorne Yard in Indianapolis, will bring trains directly into and out of that
yard, and will switch its
trains at that yard; and that CSX will switch the 2-to-1 industries at
Indianapolis for NS.
(2) Crawfordsville, a 2-to-1 point, is served today by Conrail and CSX.
The CSX/NS/CR application
envisions the assignment to CSX of Conrail's Indianapolis-Crawfordsville line,
but also envisions: that
NS will serve all 2-to-1 shippers at Crawfordsville under haulage and trackage
rights; and that CSX will
perform the actual switching at Crawfordsville. (3) Muncie, a 2-to-2 point, is
served today by Conrail
and NS. The CSX/NS/CR application envisions that Conrail's Muncie tracks will
be assigned to CSX.
(4) Shelbyville, a 1-to-1 point, is served today by Conrail. The
CSX/NS/CR application envisions that
Conrail's Shelbyville tracks will be assigned to CSX.

ISRR contends that, because NS will not have sufficient traffic to support
routine service at
Indianapolis and Crawfordsville, CSX vs. NS competition post-transaction will
not be as strong as CSX
vs. Conrail competition pre-transaction. ISRR also contends that, whereas
Conrail today offers a neutral
and indifferent gateway service for shippers located on its
Indianapolis-Crawfordsville, -Muncie, and -Shelbyville lines (as respects
traffic moving from/to nearby CSX and NS junctions), the post-transaction
CSX will have a strong economic incentive to favor its own routes.(313)

The one shipper of most concern to ISRR is Indianapolis Power & Light
(IP&L), which has two
Indianapolis generating stations. (1) ISRR indicates that IP&L's Perry K
plant, which is located on a
Conrail line in Indianapolis, can receive coal originated by either Conrail,
ISRR, or INRD. ISRR claims
that, because Conrail does not serve IP&L's origin mines, Conrail functions
today as a switch carrier, and
is neutral as between traffic originated by ISRR and INRD. CSX, ISRR fears,
would not be neutral
(because INRD is an 89%-owned CSX subsidiary). (2) ISRR indicates
that IP&L's Stout plant, which is
located on an INRD line in Indianapolis, today has several routing options:
INRD direct; CSX-INRD;
ISRR-Switz City-INRD; ISRR-Indianapolis-Conrail-INRD; CP-INRD; and
Conrail-INRD. ISRR
contends that, whereas it has been able to compete for the Stout traffic via
the Conrail switch at
Indianapolis (because Conrail, which does not serve the origin mines, has been
a neutral switching
carrier), it will not be able to compete for this traffic post-transaction
(because CSX will have an
economic incentive to favor INRD).

ISRR also claims that the CSX/NS/CR transaction will effectively eliminate
three additional
competitive options that are presently available to IP&L: the option of
building out from the Stout plant
to a nearby Conrail line; the option of moving coal to the Stout plant via a
truck transload facility to be
established on a nearby Conrail line; and the option of moving coal by truck to
the Perry K plant either
from the Stout plant or from a nearby INRD yard. ISRR claims that, because
these options depend on
Conrail vs. INRD competition, they cannot possibly survive the CSX/NS/CR
transaction; CSX, ISRR
insists, cannot be expected to compete effectively with its 89%-owned
subsidiary (INRD). ISRR further
claims that, despite the NS Indianapolis rights provided for in the CSX/NS/CR
application, NS will not
be able to compete effectively with CSX for traffic moving to IP&L's Perry
K and Stout plants: because
NS, which does not serve IP&L's origin mines, will not be able to originate
the traffic; because NS' post-transaction route from the Southwestern Indiana
mine region to Indianapolis will be highly circuitous;
because the eastern mines served by NS are too far away to be competitive with
nearby Indiana coal
sources; and because NS will not be permitted to connect with ISRR (and
therefore will not be able to
perform the switch services currently performed by Conrail).

ISRR contends that, with the traffic diversions (especially the IP&L
traffic diversions) to
CSX/INRD that will result from the new rail alignment envisioned in the
CSX/NS/CR application, ISRR
stands to lose $1.5 million in annual revenues (out of a total of approximately
$9 million in annual
revenues). The loss of these revenues, ISRR warns, would be devastating both
to ISRR and also to those
ISRR-served shippers whose transportation needs cannot economically be met by
other modes of
transportation. ISRR claims that it would have to abandon the northern segment
of its line, cutting its
connection to Indianapolis.

ISRR therefore asks that we require that ISRR be granted:
(1) overhead trackage rights in
Indianapolis, over a Conrail line to be assigned to CSX, between MP 6.0 on
ISRR's Petersburg
Subdivision and IP&L's Perry K facility; (2) overhead trackage rights in
Indianapolis, over a Conrail line
to be assigned to CSX and over a 7-mile segment of an INRD line, between MP 6.0
on ISRR's
Petersburg Subdivision and IP&L's Stout facility; (3) local trackage
rights in Indianapolis over all
Conrail lines in Indianapolis (including the Indianapolis Belt Line) that are
needed to access any 2-to-1
shippers located in Indianapolis; (4) local trackage rights between
Indianapolis and Crawfordsville over
the Conrail line to be assigned to CSX; (5) local trackage rights between
Indianapolis and Muncie over
the Conrail line to be assigned to CSX;(314)
and (6) local trackage rights between Indianapolis and
Shelbyville over the Conrail line to be assigned to CSX. ISRR also asks that
we retain jurisdiction to
establish compensation and other terms in the event the parties are unable to
resolve these matters
through negotiations. ISRR claims that the trackage rights it seeks: (a)
would enable it to retain its
current traffic base and to compete for some new traffic, and would thereby
make it possible for ISRR to
continue to provide essential rail service to its customers; (b) would
allow it to provide an economical
switching service to nearby Class I connections, and would thereby preserve
intramodal competition in
Indianapolis and the surrounding area; and (c) would provide more
efficient routings and new marketing
opportunities not only for ISRR itself but also for other shortlines in the
Indianapolis area.

LIVONIA, AVON & LAKEVILLE. LAL, a Class III railroad
that operates over two lines in
Western New York, indicates that its interests in this proceeding relate to its
Genesee Junction-Avon-Lakeville line, an approximately 29.4-mile north-south
line that runs between (i) Conrail's Genesee
Junction Yard in Chili, NY, immediately south of Rochester, NY, and (ii)
Lakeville, NY. LAL, which
was organized in 1963 to save tracks that the Erie-Lackawanna Railroad Company
(EL) sought to
abandon, originally operated between Avon (the location of the LAL/EL
interchange) and
Lakeville/Livonia (LAL's southern termini). The Avon interchange, at EL MP
366.2, was LAL's only
interchange; LAL was, from the start, "captive" to EL. In the mid-1970s, at
the time of the creation of
Conrail, LAL attempted to acquire the EL line that ran west from Avon to
Caledonia; this acquisition,
had it been accompanied by acquisition of or trackage rights over the 0.2-mile
segment between MPs
366.2 and 366.4, would have given LAL a connection, at Caledonia, with the
Baltimore and Ohio
Railroad Company (B&O). LAL, however, was not given an opportunity to
purchase, or to acquire
trackage rights over, the 0.2-mile segment; because there was no reason to
acquire the Caledonia-Avon
line without access rights to the 0.2-mile segment, LAL never acquired that
line (which was, in due
course, abandoned); and the LAL/EL Avon interchange at MP 366.2 became, in
1976, the LAL/Conrail
interchange.

The LAL/Conrail interchange remained at Avon until 1996, at which time LAL
acquired
Conrail's Genesee Junction-Avon line (i.e., the northern segment of what is now
LAL's Genesee
Junction-Avon-Lakeville line). LAL's ownership of the Genesee
Junction-Avon-Lakeville line extends
to the east end of Conrail's Genesee Junction Yard, ownership of which was
retained by Conrail. LAL
claims that Conrail retained ownership of Genesee Junction Yard in order to
block LAL from
connecting, at the west end of the yard, with the Rochester & Southern
Railroad (R&S), a Class III
railroad whose line runs south approximately 44 miles to Silver Springs, NY, at
which point R&S
connects both with CP and with Conrail (on Conrail's Buffalo-Corning line).
LAL indicates that,
although it has the right to operate in Genesee Junction Yard for purposes of
the LAL/Conrail
interchange, and although R&S also has the right to operate in the yard
(for purposes of an R&S/Conrail
interchange) and through the yard (for certain other purposes), neither LAL nor
R&S has the right to
operate in the yard for purposes of an LAL/R&S interchange (which,
accordingly, does not exist). At
present, therefore, LAL, which was for 20 years "captive" to Conrail at Avon,
see LAL-4 at 9 and 11,
remains "captive" to Conrail at Genesee Junction Yard.(315)

The CSX/NS/CR application envisions that Conrail's
Buffalo-Rochester-Syracuse line, and
Genesee Junction Yard along with it, will be assigned to CSX. LAL fears that
this assignment will
adversely affect competitive rail service for shippers and receivers on its
line because CSX, which will
be much larger and more remote than Conrail, will be even more inclined than
Conrail to neglect the
needs of captive businesses. Operational issues are also of concern to LAL,
which notes that grain
shipments from LAL origins to Conrail destinations on the Delmarva Peninsula
and in Pennsylvania will
require duplicative costs and multiple interchanges attendant upon CSX/NS
interline service. A CSX/NS
interline routing, LAL insists, will not be equivalent to a Conrail single-line
routing. LAL also contends
that its customers will be adversely impacted by the fact that certain traffic
that now moves, or that now
could move, in NS/Conrail/LAL joint-line service will henceforth have to move
in NS/CSX/LAL joint-line service. LAL insists that, as a practical matter
(i.e., given CSX vs. NS rivalry), any such joint-line
routings involving LAL simply will not survive the CSX/NS/CR transaction.

LAL therefore asks that we require that LAL be allowed to acquire ownership
of, or trackage
rights over, the approximately 1 route mile of trackage constituting Genesee
Junction Yard,(316) with the
right to directly interchange with all carriers with access to that yard (the
only such carriers mentioned in
the record are CSX and R&S), subject to terms and conditions to be
negotiated by LAL and CSX or, if
negotiations fail, to be set by the Board.(317) This condition, LAL contends, would allow
LAL's shippers to
access both CSX and R&S,(318) and is
necessary: to mitigate the CSX/NS/CR transaction's adverse impact
on food processing and agricultural businesses in New York; to keep shippers on
the Genesee Junction-Avon-Lakeville line competitive with other shippers in the
region; and to preserve LAL as a provider of
essential services to shippers on the Genesee Junction-Avon-Lakeville
line.(319)

NEW ENGLAND CENTRAL RAILROAD. NECR, a Class III railroad
that operates over
approximately 343 miles of track between East Alburg, VT, and New London,
CT, claims that, in at least
two respects, the CSX/NS/CR transaction, by substituting CSX for Conrail, will
competitively
disadvantage New England shippers and shortlines. (1) NECR claims that
1-to-1 shippers in New
England will be competitively disadvantaged vis-à-vis their 1-to-2
competitors (competitors that are
served pre-transaction by Conrail but that will be served post-transaction by
CSX and NS). (2) NECR
claims that, for those 1-to-1 shippers in New England that ship to points
open today to both CSX and NS,
the neutral gateway service now provided by Conrail will not be provided
post-transaction by CSX,
which will have a strong incentive to favor its own routes by raising rates or
reducing service for traffic
moving to NS destinations.

NECR is also concerned that, with the traffic diversions that will result
from the new post-transaction rail alignments, NECR stands to lose up to $8
million (i.e., almost half) of its annual
revenues. The loss of these revenues, NECR warns, would have a devastating and
possibly fatal effect
on NECR, which would be compelled to make significant reductions in service
throughout its system and
to discontinue service altogether on marginal sections. The effect, NECR adds,
would be devastating to
those NECR-served shippers that have no practical alternative to NECR's rail
service (e.g., NECR
customers receiving forest products from Canadian origins); these shippers
would lose essential rail
service. NECR adds: that other shippers would incur increased costs in
diverting their freight to truck;
and that Amtrak service over NECR's system would be jeopardized.

NECR therefore asks that we require that NECR be granted "limited trackage
rights" over the
Conrail lines to be assigned to CSX,(320)
(1) between Palmer, MA (the NECR/Conrail connection point),
and West Springfield, MA, a distance of approximately 18 miles, (2)
between West Springfield, MA, and
Albany, NY (including Selkirk, NY, and Mechanicville, NY), a distance of
approximately 98 miles, and
(3) on the west side of the Hudson River, between Albany, NY, and the North
Jersey SAA, a distance of
approximately 140 miles. NECR also asks that we retain jurisdiction to
establish terms in the event the
parties are unable to resolve these matters through negotiations. NECR claims
that the trackage rights it
seeks: (a) would allow it both to retain some present traffic that CSX and NS
would otherwise divert and
also to attract some new traffic, and would thereby allow NECR to continue to
provide essential rail
service to its on-line customers; (b) would, by enabling NECR to offer New
England shippers and
shortlines alternative access to Class I carriers in the
Selkirk-Albany-Mechanicville area and in the North
Jersey SAA, resolve the anticompetitive disadvantages that New England
shippers and shortlines are
certain to suffer if the primary application is approved without conditions;(321) and (c) would provide more
efficient routings and new marketing opportunities not only for NECR itself but
also for other
New England shortlines.(322)

NEW YORK & ATLANTIC RAILWAY. NYAR, which began
operations in May 1997, holds
an exclusive franchise to provide freight service over LIRR's rail lines, which
extend between
Pennsylvania Station (in Manhattan) and Montauk (at the eastern tip of
Long Island). NYAR notes that,
aside from Conrail, P&W, and NYCH, NYAR is (as LIRR formerly was) the sole
provider of rail freight
service on Long Island (i.e., the Boroughs of Brooklyn and Queens and the
Counties of Nassau and
Suffolk). NYAR claims that, in this area, its geographical coverage is far
more extensive than that of
Conrail, P&W, and NYCH combined. NYAR's geographical coverage extends
almost the entire east-west length of Long Island. The geographical coverage
of Conrail and P&W, in contrast, is limited:
their only access to Long Island is on the line that runs between Oak Point
Yard (in the South Bronx) and
Fresh Pond Yard (in Queens).(323) NYCH's
geographical coverage is also limited; its operations are
conducted in and near the Bay Ridge area of Brooklyn.(324)

NYAR's interests in this proceeding are focused upon the east-of-the-Hudson
"joint facility"
advocated by the Nadler Delegation, by which is meant (i) a cross-harbor
float operation, and (ii) a core
system of rail lines and terminals east of the Hudson River, including LIRR's
11-mile Bay Ridge Line
(now operated over by NYAR) that extends between Bush Junction in Brooklyn and
Fresh Pond Yard in
Queens. NYAR asks that we reject the Nadler Delegation's proposal insofar
as that proposal addresses
the Bay Ridge Line.

The Bay Ridge Line, NYAR contends, is critically important to NYAR. The
Bay Ridge Line:
provides NYAR its only access to the NYCH/NYAR interchange at Bush Junction;
provides NYAR its
only access on a freight-only line to the Conrail/NYAR and P&W/NYAR
interchanges at Fresh Pond
Yard; is the only line in the NYAR system over which NYAR can handle overhead
traffic; and is one of
only two lines in NYAR's entire system that are not subject to joint use by
LIRR for passenger operations
(and the resulting flexibility to cater to shippers' service needs, NYAR
insists, will allow it to attract new
shippers to locate on the line and to induce current shippers to increase the
amount of traffic shipped over
the line).

NYAR claims that operations by applicants over the Bay Ridge Line would
threaten NYAR's
very existence. Applicants, NYAR claims, would have a tremendous advantage in
competing for traffic
that either originates or terminates on the line and that moves to/from
(respectively) points served by
CSX or NS. NYAR also fears that overhead traffic now handled by NYAR likely
would be lost to
applicants. And, NYAR adds, the physical characteristics of the single-tracked
Bay Ridge Line do not
make it a good candidate for multiple carrier use. NYAR contends: that,
because the CSX/NS/CR
transaction will not cause any fundamental changes in rail service on Long
Island in general or on the
Bay Ridge Line in particular, inclusion of the Bay Ridge Line in a joint
facility would not address any
transaction-related competitive harm; that 49 U.S.C. 11324(c) does not
authorize us to compel the
divestiture by a nonapplicant of its operating rights, or any portion thereof,
in the manner proposed by
the Nadler Delegation; that 49 U.S.C. 11102 does not authorize us to
compel NYAR to grant applicants
access to the Bay Ridge Line, (i) because the Bay Ridge Line is not a
terminal facility, and (ii) because,
in any event, multi-carrier use of this line would substantially impair NYAR's
ability to use this line to
handle its own traffic; and that 49 U.S.C. 10907(c)(1) does not authorize us to
compel the sale of the Bay
Ridge Line to applicants, (i) because sec. 10907(c)(1) does not
address competitive access concerns, and
(ii) because the Bay Ridge Line does not have any of the attributes necessary
to make it a candidate for a
forced sale under sec. 10907.(325)

NEW YORK CROSS HARBOR RAILROAD. NYCH, a Class III
railroad that operates the
lines formerly operated by the New York Dock Railway (NYDR) in Brooklyn, NY:
serves shippers
along a network of lines in the Bay Ridge area of Brooklyn; operates a car
ferry service across New York
Harbor, between its lines in Brooklyn (on the east side of the harbor) and
Conrail's Greenville Yard in
Jersey City, NJ (on the west side of the harbor); and serves customers at
Greenville Yard. NYCH
claims: (1) that, for traffic moving from/to shippers on its lines in
Brooklyn, NYCH provides the
principal connection to Conrail at Greenville Yard; (2) that, for traffic
moving from/to points on the
Long Island Rail Road (LIRR), NYCH provides a connection between LIRR and
Conrail;(326) and (3) that,
for traffic moving between (i) points in Southern New England and in
Southern New York east of the
Hudson River, on the one hand, and (ii) points south and west of New York
City, on the other hand,
NYCH provides a portion of the "bridge" between Conrail's lines north of New
York City (these lines
extend south only as far as Fresh Pond Yard in Queens) and Conrail's lines west
of New York Harbor
(these lines extend east only as far as Greenville Yard in Jersey City).

NYCH acknowledges that, upon implementation of the CSX/NS/CR transaction,
it will have, for
the first time, two Class I connections because Greenville Yard is in the North
Jersey SAA. NYCH's
post-transaction prospects, however, are not, in NYCH's view, entirely
satisfactory because, although
NYCH will have two Class I connections at Greenville Yard (CSX and NS), it
will still have, via NYAR,
only one Class I connection at Fresh Pond Yard (CSX). NYCH claims that its
status, as respects its
"bridge" function, will be 1-to-1: the pre-transaction
Conrail/NYCH/NYAR/Conrail routing will become
a post-transaction CSX/NYCH/NYAR/CSX routing; there will be no comparable
post-transaction
routing involving NS, because Fresh Pond Yard and Conrail's lines north
thereof are to be assigned to
CSX.

(1) NYCH fears that CSX, like Conrail, will favor its own Selkirk Yard
(Albany, NY) routing,
and will continue to route traffic around, rather than via, NYCH, which (NYCH
claims) will threaten
NYCH's ability to serve its on-line customers. NYCH therefore asks that we
require CSX to utilize the
CSX/NYCH/NYAR/CSX routing for traffic moving between points on Long Island and
in Southern
New England and in adjacent parts of New York State, on the one hand,
and, on the other hand, points in
the Mid-Atlantic States and the South and Southwest, where the
CSX/NYCH/NYAR/CSX routing (what
NYCH calls its "Greenville Gateway") represents the shortest, the most
efficient, and the most
economical routing.(327)

(2) NYCH contends that the marked decline in recent decades in the volume
of traffic routed via
the Greenville Gateway reflects wrongdoing on the part of Conrail, and, on the
strength of this
contention, NYCH recently filed suit against Conrail on antitrust and other
grounds. NYCH claims that,
if it prevails in that suit, its damage award may well be substantial. NYCH
acknowledges that CSX and
NS have represented that, if necessary, they will provide any funds that are
required to enable Conrail to
discharge its post-transaction obligations. NYCH submits, however, that,
during discovery, applicants'
witnesses were unable to confirm this representation. NYCH therefore asks that
we require CSX and NS
to jointly and severally guaranty Conrail's pre-closing liabilities arising out
of litigation (or settlement of
litigation) relating to actions by Conrail that occurred prior to closing to
the extent that the post-transaction Conrail lacks sufficient assets to meet
such liabilities.(328)

NORTH SHORE RAILROAD COMPANY AND AFFILIATES. NSHR, JVRR,
NBER,
LVRR, SVRR, and UCIR ask that we "note for the record" the settlement agreement
they have entered
into with NS.

OHI-RAIL CORPORATION. Ohi-Rail, a Class III railroad that
operates over a 45-mile line
between Baird, OH (its junction with Conrail) and Hopedale, OH (its junction
with W&LE), indicates
that its interests in this proceeding are focused on coal traffic originated at
mines in Southeast Ohio and
shipped to Centerior's Eastlake Plant in Eastlake, OH. This traffic, Ohi-Rail
indicates, presently moves
in a Conrail single-line routing.(329)
Post-transaction, however, this traffic (and, more broadly, any traffic
originated on NS' Conrail lines or on connecting shortlines accessed by NS via
its Conrail lines) will
have to be routed NS/CSX because, although NS is to acquire most of the
relevant Conrail lines in
Eeastern Ohio, CSX is to acquire the relevant Conrail tracks in the Cleveland
area. Ohi-Rail, which fears
that CSX may favor its own single-line coal movements, warns that the loss of
single-line service to the
Eastlake Plant and other similarly situated utilities will have a detrimental
impact on the development of
Ohio coal reserves. Ohi-Rail therefore asks that we require that NS be granted
direct access to
Centerior's Eastlake Plant.

PHILADELPHIA BELT LINE RAILROAD COMPANY. PBL, a Class III
railroad, owns
approximately 16.3 miles of track, right-of-way, and trackage rights along the
waterfront in Philadelphia,
PA, extending (i) from Bridge Street on the north, (ii) south to Allegheny
Avenue (on the northern side
of the site of Conrail's "former" Port Richmond Yard, see PBL-10 at 4
n.4), (iii) further south to
approximately Lehigh Avenue (which appears to be on the south side of the Port
Richmond Yard), and
(iv) further south, along or adjacent to Delaware Avenue, to Greenwich
Yard. These tracks, right-of-way, and trackage rights, however, do not
presently allow for uninterrupted operation from Bridge Street
to Greenwich Yard; obstructions that PBL claims have been erected by the City
of Philadelphia block
such uninterrupted operation (these obstructions are apparently at the site of
the Port Richmond Yard).
As a practical matter, PBL's lines exist today as three discrete segments: the
Belt Line North (from
Bridge Street to Allegheny Avenue, a distance of approximately 3 miles);(330) the obstructed segment
(from Allegheny Avenue to approximately Lehigh Avenue); and the Belt Line South
(from
approximately Lehigh Avenue to Greenwich Yard).

PBL claims that, at the time PBL was chartered in 1889 and at all relevant
times thereafter, it
was intended that PBL would function as a terminal and switching company whose
facilities and services
would forever be available on an equal access basis to all railroads then and
in the future serving
Philadelphia. PBL contends that the City of Philadelphia, by ordinances
enacted in 1890 and 1914,
memorialized this concept of equal access, which PBL refers to as the Belt Line
Principle. The Belt Line
Principle, PBL adds, remains as important today as it was more than a century
ago; neutral,
nondiscriminatory access by all railroads to PBL's lines is, PBL insists,
essential to ensure that shippers
located on these lines receive service at equitable rates from all carriers
that reach the Philadelphia
market.

PBL's interests in this proceeding are focused on the Belt Line North,
which has been leased by
Conrail since 1987. Shippers on the Belt Line North, PBL claims, should
presently have three line-haul
options: Conrail, CSX, and CP. PBL claims, however, that, in reality, these
shippers presently have, for
the most part, only one line-haul option, because Conrail has imposed
excessively high reciprocal
switching charges in order to discourage these shippers from routing via CSX or
CP. PBL concedes, in
essence, that, because the Belt Line North is located in the
South Jersey/Philadelphia SAA, Belt Line
North shippers will have, post-transaction, two line-haul options: CSX and
NS. PBL notes, however,
that, in general, these shippers will continue to be unable to route via CP, or
indeed via any other railroad
that now has or that hereafter acquires access to Philadelphia.

PBL therefore asks that we require that all carriers (including CSX, NS,
and CP) that now have,
or that in the future will have, access to any points in Philadelphia be
provided equal, nondiscriminatory
access to the Belt Line North through equitable reciprocal switch rates. PBL
claims that the access
provided by this condition: would allow for realization of the Belt Line
Principle; would prevent CSX
and NS from attaining market dominance over Belt Line North shippers; and would
protect the essential
services needed by shippers on the Belt Line North.

PBL, in its brief, apparently suggests (this is not entirely clear) that,
if we do not impose the
condition it has sought, we should, at the very least, state that applicants
will not have, by virtue of the 49
U.S.C. 11321(a) immunity provision, a right to disregard Conrail's
pre-transaction Belt Line Principle
obligations. Such a statement, PBL apparently contends, would effectively
preserve the status quo
respecting the Belt Line Principle. See PBL-18 at 9-11.(331)

PROVIDENCE AND WORCESTER RAILROAD COMPANY. P&W, a
regional railroad
that operates in Massachusetts, Rhode Island, New York, and Connecticut,
holds overhead trackage
rights between Fresh Pond Yard (in Queens) and New Haven, CT; these
overhead rights extend over
lines owned by Conrail,(332) the New York
Metropolitan Transportation Authority (NYMTA), Amtrak, and
the Connecticut Department of Transportation (CTDOT); and, with but one
exception, these overhead
rights are limited to the movement of construction aggregates.(333) P&W's interests in this proceeding are
focused upon two matters: the joint facility advocated by the Nadler
Delegation; and certain terminal
properties in New Haven.(334)

The Joint Facility Proposal. (1) P&W suggests that the Nadler
Delegation's proposal may reflect
a misunderstanding of P&W's rights on the Fresh Pond Yard-New Haven line.
P&W insists that, except
as respects the Danbury and Waterbury Branches, P&W's rights on the Fresh
Pond Yard-New Haven line
are limited solely to the overhead movement of construction aggregates.
(2) P&W is concerned that the
Nadler Delegation's proposal envisions the introduction of an additional
railroad on the portion of the
Fresh Pond Yard-New Haven line that lies within the limits of the proposed
joint facility. The Fresh
Pond Yard-New Haven line, P&W claims, is heavily used both by Conrail and
P&W, and also (for
passenger operations) by Amtrak and Metro-North Commuter Railroad Company
(MNCR). The
introduction of a third freight operator on this line, P&W warns, would
raise significant concerns
regarding the availability of adequate operating windows. (3) P&W submits
that, if we decide to require
that an additional carrier be granted operating rights on the Fresh Pond
Yard-New Haven line or any
portion thereof, we should allow P&W to be that additional carrier.

Acquisition of New Haven Station. P&W claims that, pursuant
to an order entered April 13,
1982, by the Special Court created by the Regional Rail Reorganization Act of
1973, Conrail must, upon
implementation of the CSX/NS/CR transaction, sell to P&W certain terminal
properties in the vicinity of
New Haven, CT. The 1982 order provides, in relevant part, that, if Conrail
elects to withdraw from or
abandon or discontinue freight service obligations on the terminal properties
known as "New Haven
Station," and if, on application of P&W, the Federal Railroad Administrator
shall find that P&W is
continuing to operate as a self-sustaining railroad capable of undertaking
additional common carrier
responsibilities without federal financial assistance, then Conrail shall sell
the New Haven Station
properties to P&W. The 1982 order further provides: that such sale shall
be at a reasonable price and on
reasonable terms and conditions agreed upon by Conrail and P&W or, in the
absence of agreement, set in
arbitration; and that, upon the sale, P&W shall succeed to Conrail's
service obligations, but subject to
certain conditions. See P&W's comments filed October 21, 1997,
Exhibit 1 at pp. 20-22 (sec. 21) and
Appendix D.

The record indicates: that, at or after the time the primary application
was filed with the Board,
Conrail was advised by P&W that it intended to exercise its rights to
acquire New Haven Station; that
Conrail, however, refused either to negotiate or to arbitrate; that, on
November 12, 1997, P&W sought,
in the United States District Court for the District of Columbia, a
declaration that its right to purchase
New Haven Station had matured; that, on December 19, 1997, Conrail
asserted that P&W's complaint
"must be dismissed because its claims do not present a ripened case or
controversy appropriate for
judicial intervention at this time";(335) and
that, by order entered January 22, 1998, the District Court,
citing the ripeness doctrine, dismissed P&W's complaint, but expressly
granted P&W leave to refile after
we render a final decision on the primary application.(336)

P&W claims: that, upon the assignment of Conrail's New England
lines to CSX, Conrail will
have "withdraw[n] from or abandon[ed] or discontinue[d] freight service" at New
Haven Station; that
P&W will continue to operate as a self-sustaining railroad capable of
undertaking additional common
carrier responsibilities without federal financial assistance;(337) and that, in compliance with the 1982
order, Conrail, once it withdraws from New Haven Station, must sell the New
Haven Station properties
to P&W. P&W further contends, in essence: that claims arising under
the 1982 order cannot be resolved
by the Board but must be resolved by the United States District Court for the
District of Columbia, which
now exercises the jurisdiction formerly exercised by the now defunct Special
Court; and that P&W's
rights under the 1982 order cannot be preempted by 49 U.S.C. 11321(a).

Applicants are of the view that P&W's rights under the 1982 order can
be adjudicated by the
Board and must be preempted under 49 U.S.C. 11321(a). Applicants also
contend that, in any event, the
CSX/NS/CR transaction will not trigger P&W's rights under the 1982 order
because Conrail will
continue to own New Haven Station (and therefore will not withdraw from or
abandon or discontinue
freight service at that station).(338)
Applicants further contend that, even if P&W's rights under the 1982
order are triggered by the CSX/NS/CR transaction and are not preempted under 49
U.S.C. 11321(a),
P&W is estopped from asserting such rights because the P&W/CSX
settlement requires P&W to voice
"unconditional support" for the primary application. See CSX/NS-176 at
99-101 and 384; CSX/NS-177,
Vol. 2A at 32-33.(339)

READING BLUE MOUNTAIN & NORTHERN. RBMN, a
Class III railroad, operates over
approximately 280 miles of rail line in eastern Pennsylvania, in a north-south
corridor that extends
between Mehoopany and Reading. Within this corridor, RBMN's lines comprise two
physically
separated divisions (the Lehigh Division, which extends between Mehoopany and
Lehighton, and the
Reading Division, which extends between Hazleton and Reading) which are linked
by two separate sets
of trackage rights: (i) trackage rights over Conrail, between Hazleton
and M&H Junction;(340) and
(ii) trackage rights over C&S and Conrail, between Haucks Junction and
Packerton Junction.(341) Traffic
moving on the Lehigh Division is apparently routed RBMN/Conrail via either
Mehoopany or
Lehighton;(342) traffic moving on the Reading
Division is routed RBMN/Conrail via Reading.

RBMN has physical connections with two Class I railroads (CP, via a
connection in the Scranton
area with D&H; and Conrail), but, on account of a restriction it accepted
upon its acquisition of the
Lehigh Division from Conrail in 1996, RBMN, for the most part, has but a single
realistic Class I
connection (Conrail). The restriction, which we shall refer to as the blocking
provision, provides "for the
payment to [Conrail], its successors or assigns, of certain specified [penalty]
amounts for any rail traffic
handled by [RBMN, or its successors or assigns], which originates, terminates
or otherwise moves over
the [Lehigh Division], and which could commercially be interchanged with
[Conrail], its successors or
assigns, but is interchanged with another rail carrier." RBMN-5, V.S. Muller,
Appendix 2 at 3-4.(343)
RBMN claims that, in practice, the blocking provision works as intended,
effectively blocking RBMN
from participating in non-Conrail routings of traffic that can "commercially"
be routed via Conrail. See
RBMN-5, V.S. Muller, Appendix HC-2.

RBMN contends that the CSX/NS/CR application, which envisions that all of
the Conrail lines
with which RBMN connects will be assigned to NS, will disadvantage RBMN and/or
its customers in
several ways. RBMN claims: (1) that the RBMN/NS relationship may result in an
increase in the costs
borne by RBMN and/or its customers; (2) that, as a matter of state law, the
substitution of NS for Conrail
may result in an expansion of the effect of the blocking provision;(344) (3) that the division of Conrail
contemplated by the primary application may jeopardize certain existing traffic
flows (by changing
Conrail single-line movements to CSX/NS joint-line movements); and
(4) that the creation of new rail
competition in other areas combined with the perpetuation of the Conrail
monopoly in the RBMN region
will adversely affect that entire region. Furthermore, RBMN, which now
receives approximately
$85,000 per month in fees from D&H trackage rights operations over the
Lehigh Division, fears that
perhaps half of the D&H trackage rights traffic will be diverted to another
route post-transaction. The
traffic is now routed Scranton-Allentown-Reading-Philadelphia (via the Lehigh
Division) but, on
account of certain trackage rights acquired by CP in a settlement agreement
with NS, much of this traffic
is likely to be routed Scranton-Harrisburg-Reading-Philadelphia
post-transaction.

RBMN therefore asks that we require: (1) that the blocking provision be
eliminated or
modified;(345) and (2) that D&H be
permitted to access, via RBMN's Reading Division, D&H's existing
trackage rights on the Conrail line that runs through Reading.(346) Elimination of the blocking provision,
RBMN contends: would extend rail competition to the RBMN region; would prevent
any exacerbation
of the anticompetitive effects of the blocking provision; would enable RBMN to
retain traffic that might
otherwise be lost; would allow certain shippers to enjoy "single-line"
service;(347) and would enable
RBMN to eliminate, in certain instances, excessively circuitous routings.
Allowing D&H to access its
trackage rights on the Conrail line that runs through Reading, RBMN contends:
would provide RBMN
the opportunity to retain, and indeed to expand, the trackage rights revenue
now derived from D&H
trackage rights operations; and would enable D&H to avoid congested
conditions common on alternative
routings.

R.J. CORMAN RAILROAD COMPANY/WESTERN OHIO LINE. RJCW, a
Class III
railroad that operates over three lines in Western Ohio, indicates that its
interests in this proceeding are
focused on its Glenmore-Lima line. RJCW notes that, at present, the
Glenmore-Lima line's only direct
Class I connection is Conrail at Lima. RJCW adds, however, that it also has,
via a Conrail intermediate
switch at Lima, access to both CSX and NS. RJCW states that traffic routed
RJCW/CSX or RJCW/NS is
switched through a British Petroleum yard located in Lima, over a 2.3-mile
segment of Conrail's line by
RJCW itself on behalf of Conrail. RJCW contends that Conrail's willingness to
charge $60 per carload
for this intermediate switch reflects the fact that Conrail is not competitive
with respect to origins and
destinations on traffic routed either RJCW/CSX or RJCW/NS.

The CSX/NS/CR application envisions that Conrail's 2.3-mile Lima switch
line will be assigned
to CSX. RJCW fears that, once that happens, RJCW, although it will then have
direct access to CSX,
will no longer have, as a practical matter, any access to NS. RJCW therefore
asks that we require that
RJCW be allowed to acquire ownership of, or trackage rights over, Conrail's
2.3-mile switch line
(between approximately MPs 54.4 and 52.1), subject to terms and conditions to
be negotiated by RJCW
and CSX or, if negotiations fail, to be set by the Board. This condition, RJCW
contends, would allow
RJCW to preserve a viable RJCW/NS routing in competition with the RJCW/CSX
routing, and is
necessary to keep Glenmore-Lima shippers competitive with other grain and
fertilizer shippers in the
region and to preserve RJCW as a provider of essential services on the
Glenmore-Lima line.

THE ELK RIVER RAILROAD, INCORPORATED. TERRI, a Class III
railroad, operates
over 79 miles of track in Clay, Braxton, and Gilmer Counties, WV, and provides
(by its account)
essential rail service to an economically depressed region of south-central
West Virginia. TERRI, which
presently has a single Class I connection (CSX at Gilmer, WV), has planned, for
several years, to "build
out" to a second Class I connection, and, in fulfillment of this plan, it has
sought and received regulatory
authorization to construct a 30-mile connecting track from its western terminus
(at Hartland, WV) to a
Conrail line at Falling Rock, WV (about 17.1 miles northeast of
Charleston, WV), and it is presently in
the process of acquiring the necessary right-of-way. TERRI claims that the
success of its build-out will
depend upon: (1) the rehabilitation of Conrail's Charleston-Falling
Rock-Sanderson line; and (2) the
establishment of reasonable arrangements pursuant to which TERRI-originated
coal may access rail-to-barge transloading docks at Charleston.

Because the CSX/NS/CR application envisions that NS will be assigned
Conrail's West Virginia
Secondary (between Columbus, OH, and Charleston, WV) and also Conrail's
Charleston-Falling Rock-Sanderson line, the effect of the CSX/NS/CR transaction
upon TERRI's build-out would seem to be
merely the substitution of NS for Conrail as TERRI's potential second
Class I connection. TERRI
claims, however, that NS' interests vis-à-vis TERRI's build-out line are
not precisely the same as
Conrail's. Conrail, TERRI insists, was eager to gain additional coal traffic,
and was therefore willing to
work with TERRI. NS, TERRI adds, has substantial reserves of marketable coal
on its own lines, and,
for this reason, may be less interested in opening up new markets for
TERRI-originated coal than Conrail
was. TERRI therefore asks that we require a commitment by NS to negotiate in
good faith with TERRI
with respect to TERRI's acquisition of the Charleston-Falling Rock-Sanderson
line and with respect to
reasonable interchange arrangements for traffic moving to or from points beyond
that line, all in
accordance with TERRI's prior discussions with Conrail.

WHEELING & LAKE ERIE RAILWAY COMPANY. W&LE, a
regional railroad which
was created in 1990 as an NS spin-off(348) and
which has since expanded with line acquisitions and
trackage rights grants from NS, CSX, and Conrail, operates over 864 miles of
track in Ohio,
Pennsylvania, West Virginia, and Maryland. W&LE's main stem extends 149
miles from Bellevue, OH,
to Mingo Junction, OH; W&LE serves numerous Ohio points, including
Bellevue, Carey, Chatfield,
Wellington, Spencer, Akron, Canton, Orrville, Brewster, and
Mingo Junction; and W&LE extends
beyond Mingo Junction (i) south to Benwood, WV, and (ii) east to Rook and
Connellsville, PA (and, via
trackage rights, it extends beyond Connellsville to Hagerstown, MD).
W&LE's interests in this
proceeding are focused mainly on its relationship with NS, which has been
W&LE's most significant
joint-line partner. W&LE fears that NS, once it acquires the Conrail lines
it will receive in the
CSX/NS/CR transaction, (a) will have little need for a W&LE/NS
routing, and (b) will be W&LE's most
pervasive head-to-head competitor. The consequences, W&LE concludes, are
likely to be so severe
(a loss of more than 16,000 cars and $12.7 million in gross revenue) that,
if the CSX/NS/CR transaction
is implemented as proposed, W&LE will be rendered insolvent by no later
than the year 2001.

W&LE therefore asks that we require that W&LE be granted:
(1) access between Bellevue and
Chicago by means of a haulage agreement, with underlying trackage rights; (2)
access between Bellevue
(Yeomans) and Toledo, a distance of 54 miles (on an NS line), by means of a
haulage agreement, with
underlying trackage rights;(349) (3) access
via a lease of, with a right to purchase, NS' Huron Branch
(Shinrock to Huron) and NS' Huron Dock on Lake Erie (W&LE currently
has a short term lease on the
dock); (4) access between Benwood, WV, and Brooklyn Junction, WV, a
distance of 33.4 miles (on a
CSX line), by means of a haulage agreement, with underlying trackage rights;(350) (5) trackage rights (a)
on Conrail's Fort Wayne Line (to be assigned to NS), to reach the National
Stone quarry near Bucyrus
and also to reach stone receivers in Wooster (MP 135) and on a side track
extending approximately from
MP 87.3 to MP 85.1, near Alliance,(351)
(b) on NS' Chatfield-Colsan line, a distance of 10.8 miles, between
Chatfield and Colsan, to provide alternative access to the Spore Industrial
Track, (c) on NS' Maple
Grove-Bellevue line, a distance of 21.3 miles, between Maple Grove
(MP 269.4) and Bellevue (MP
248.1), to reach a stone quarry located on the Northern Ohio & Western
Railway (NO&W) in the vicinity
of Redlands, and (d) on CSX's New Castle Subdivision in Akron (a distance
of 0.5 miles), and then on
Conrail's lines in the area east of Akron (these lines are to be assigned to
NS), to reach stone terminal
destinations in the Macedonia, Twinsburg, and Ravenna areas;(352) (6) access to Wheeling Pittsburgh Steel
at Allenport, PA, by means of a haulage agreement with underlying trackage
rights over CSX from MP
41 near Monessen, PA, to MP 53.9 near Brownsville, PA, a distance of
12.9 miles, and over Conrail
from MP 53.9 near Brownsville, PA, to Wheeling Pittsburgh Steel at
Allenport, PA, a distance of
9.5 miles; (7) access over CSX's New Castle Subdivision, by means of a
haulage agreement, with
underlying trackage rights, (a) from Akron, OH, to the Ohio Edison Power plant
at Niles, OH, a distance
of 42 miles, and (b) to Erie, PA, for interchange with other
railroads;(353) (8) access via a lease
of, with a
right to purchase, Conrail's Randall Secondary between Cleveland (MP 2.5)
and Mantua (MP 27.5);
(9) access, apparently via trackage rights, to Reserve Iron & Metal,
L.P., in Cleveland;(354) (10) access,
apparently via trackage rights, to Weirton Steel Corporation at Weirton, WV;(355) (11) with respect to four
"joint facilities" the maintenance of which has been W&LE's responsibility
under the 1990 spin-off
arrangements that created W&LE, an order (a) relieving W&LE of the
burden of maintaining these
facilities, and (b) allocating the costs of maintenance on a proportional
use basis;(356) and (12) a guarantee
of fairness and nondiscriminatory treatment on any haulage and trackage rights
granted.

W&LE has also requested several additional conditions. W&LE asks:
(i) that we require NS to
assume W&LE's $915,000 per year lease payments on W&LE's P&WV
(Pittsburgh & West Virginia
Railroad) properties; (ii) that we encourage the full development of the
Neomodal Terminal; (iii) that we
impose an oversight condition and retain jurisdiction during the oversight
period;(357) and (iv) that we
provide, in connection with the oversight condition, a mechanism for an
inclusion proceeding in the
event W&LE fails during the pendency of the oversight proceeding.(358)

W&LE claims that the opportunities its conditions would provide might
allow it to gain revenues
of about $11 million, and might thereby allow for the preservation of W&LE
service in the Chicago-Pittsburgh Corridor. Several purposes, W&LE
contends, would be served by the continued existence of
W&LE: W&LE would continue to exist as a competitive force in the
Chicago-Pittsburgh Corridor;
W&LE would continue to provide the essential rail services it now provides;
W&LE's route structure
would be available (via NS/W&LE and CSX/W&LE joint-line routings) to
allow bunched traffic flows
to bypass congested facilities in Cleveland and Pittsburgh; and W&LE would
be able to offer routing
efficiencies for traffic flows that would otherwise move over more circuitous
CSX and NS single-line
routings.

WISCONSIN CENTRAL LTD. WCL, a Class II railroad that
operates over approximately
2,017 miles of rail line in Wisconsin, Michigan's Upper Peninsula, Minnesota,
and Illinois, asks that we
impose three conditions to protect its interests in efficient and competitive
switching services in Chicago.

Purchase of Portion of B&OCT's Altenheim Subdivision. WCL
fears that virtually all post-transaction WCL traffic interchanged at Chicago
with either CSX or NS will be subject to CSX control
as it moves through the Chicago switching district. WCL contends that, today,
it has two routings by
which it may reach NS: it may route via the Altenheim Subdivision of B&OCT
(which CSX presently
controls); or it may route via IHB (which CSX presently does not control). WCL
further contends that,
post-transaction, both of WCL's routings to reach NS will be subject to some
measure of CSX control.(359)

WCL therefore asks that we require that WCL be allowed to acquire that
portion of B&OCT's
Altenheim Subdivision that begins at the WCL/B&OCT connection at B&OCT
MP 37.4 at Madison
Street, Forest Park, IL, and that extends to a connection with UPRR and the
Panhandle Line of Conrail in
the vicinity of Rockwell Street, Chicago, IL, a distance of approximately 10
miles. WCL claims that its
ownership of this portion of the Altenheim Subdivision would allow WCL trains
to move along a new
route paralleling the congested B&OCT route between Western Avenue and
Brighton Park. This new
route, WCL contends: would allow WCL to establish, independent of CSX control,
connections with
NS, BNSF, and GTW; would thereby mitigate the CSX/NS/CR transaction's adverse
impact on switching
services competition in the Chicago switching district; and would mitigate
congestion on the B&OCT
route and thereby enhance the overall capacity and efficiency of the Chicago
switching district.(360)

Direct Interchange With CSX. WCL contends that, for many years,
CSX has operated B&OCT
not as a true intermediate switching carrier but rather as a vehicle for
obtaining desired operating
efficiencies. WCL claims: that, for many years, B&OCT has been operated
as an extension of CSX; that
CSX, maintaining the fiction that CSX itself does not operate in the Chicago
switching district, has
required that any railroad seeking to interchange with CSX in the Chicago
switching district must
interchange via B&OCT;(361) that, however,
any railroad seeking to interchange with CSX via B&OCT has
been faced with a B&OCT intermediate switching charge; that, since 1988,
this charge has been, in
whole or in large part, either waived by B&OCT or absorbed by CSX with
respect to those railroads that
accommodate CSX's pre-blocking requirements; that, in essence, the fiction that
CSX itself does not
operate in Chicago has given CSX a bargaining lever to use in demanding
blocking and classification
services from other carriers; and that these arrangements have had an
especially serious impact on
smaller railroads that have volumes of traffic that do not suit CSX's
pre-blocking needs. WCL fears that,
post-transaction, CSX will operate IHB the way it has operated B&OCT.
Under the arrangements
provided for in connection with the CSX/NS/CR application, WCL notes, CSX will
be responsible: for
dispatching IHB between Gibson, IN, and Franklin Park, IL; for managing IHB;
and for controlling Blue
Island Yard (IHB's principal yard). WCL is concerned: that IHB, subject to
the control of CSX, will
cease to be a genuinely neutral switching carrier; and that CSX will use its
management of IHB and its
ownership of B&OCT to route via B&OCT WCL/Conrail traffic now routed
via IHB.(362)

WCL therefore asks that we require that CSX, apart from B&OCT and
without the use of
B&OCT as an intermediate switch carrier, conduct direct interchange in the
Chicago switching district.
This condition, WCL contends: would implement the public policy codified at
49 U.S.C. 10742; would
increase efficiency by removing B&OCT from interlining accounting systems
where not necessary; and
would recognize the reality that CSX today is, and even more so
post-transaction will be, an active
interlining carrier present in its own name and right in Chicago.

Neutral Dispatching. WCL is concerned that, post-transaction, CSX
will control the two
Chicago switching carriers that provide WCL virtually its only access to the
Chicago switching district
either via trackage rights or as intermediate carriers (B&OCT and IHB) and
will be one of the two largest
shareholders of the third Chicago switching carrier (BRC), and will therefore
have, in WCL's judgment,
far too much control over switching and dispatching in the Chicago switching
district. Because efficient
routings through the Chicago switching district are crucial to WCL, WCL asks
that we require that
dispatching over IHB in the Chicago switching district be provided by a neutral
railroad (i.e., a railroad
other than any of the IHB owner railroads). This neutrality condition, WCL
contends, is necessary to
preserve competition and to assure adequate terminal facilities and
efficiencies.

APPENDIX D: PASSENGER RAILROADS.

AMERICAN PUBLIC TRANSIT ASSOCIATION. APTA, a trade
association representing
the North American transit industry, has concerns that the CSX/NS/CR
transaction may adversely impact
commuter rail operations throughout the eastern half of the United States, such
as: (1) the rail
realignments that will follow the CSX/NS/CR transaction may effectively limit
the access that commuter
railroads would otherwise have had to the lines operated over by CSX, NS, and
Conrail; (2) the increased
freight traffic that CSX and NS are likely to handle post-transaction may
result in greater interference
with commuter rail operations and commuter rail schedules; and (3) the
workforce reductions that will be
a consequence of the CSX/NS/CR transaction will result in additional
cross-subsidization of the freight
railroads by the commuter railroads. For example, with regard to the Railroad
Retirement System,
APTA notes: that both commuter railroads and freight railroads pay a payroll
tax based upon the number
of active employees working for each system; that this tax supports the
pensions provided to railroad
employees across the country; that, over the years, freight railroad employment
has decreased while
commuter railroad employment has increased; and that this has created a
situation in which the
commuter railroads have been compelled to provide large and growing subsidies
to the freight railroads
in the form of pension payments to freight railroad retirees.

To ensure that commuter rail operations can continue to provide the
American public with high
quality and efficient transportation service, APTA asks that we impose several
conditions upon any
approval of the primary application. (1) With regard to the access
problem, APTA suggests that we
should: promote cooperation between applicants and commuter railroads; ensure
that commuter rail
operations will be reasonably accommodated by applicants; ensure that fair and
reasonable operating
rights agreements can be established in the future, with fair and reasonable
compensation to CSX and
NS; and establish a process that will provide a means to resolve future
disputes between freight railroads
and commuter railroads, and thereby safeguard the public's interest in
passenger rail service. (2) With
regard to the interference problem, APTA suggests that we should: ensure that
commuter rail operations
are not undermined by freight rail operations, neither in the first 3
post-transaction years nor in the years
that come thereafter; provide a means to resolve disputes that arise beyond the
first 3 post-transaction
years; and move towards incentive-based operating agreements. (3) With regard
to the Railroad
Retirement problem, APTA suggests that we should: review the 1990 report of
the Commission on
Railroad Retirement Reform; consider, in conjunction with the Railroad
Retirement Board, the impact
the CSX/NS/CR transaction and further declines in freight railroad employment
will have on commuter
rail systems; and impose conditions that will ensure that CSX and NS fund any
negative financial
impacts of the CSX/NS/CR transaction upon the commuter railroads' railroad
retirement contributions.

AMTRAK. Amtrak, which has reached agreements with CSX,
NS, and Conrail,(363) has advised
that it now supports in all respects the CSX/NS/CR transaction, subject to
imposition of a limited
oversight condition that reads as follows: "The STB should require oversight,
for a 3-year period, of the
implementation and effect of the transactions subject to STB review and
approval in Finance Docket No.
33388 to the extent they may affect the on-time performance of Amtrak intercity
passenger train
services. As part of this continuing oversight, the STB should require
quarterly reports from NS and
CSX and provide Amtrak an opportunity to comment. NS, CSX and Amtrak shall
jointly recommend to
the STB objective, measurable standards to be used in such reports: on-time
performance standards
should reflect measurements employed in calculating incentive payments under
the applicable Amtrak
operating agreements. The foregoing condition is not intended to limit the
STB's authority to continue
oversight beyond the 3-year period." See NRPC-14 at 2.(364)

CHICAGO METRA. In its comments filed October 21, 1997,
the Commuter Rail Division of
the Regional Transportation Authority of Northeast Illinois (Metra or, on
occasion, Chicago Metra)
requested the imposition of several conditions primarily respecting four
interlockings in the Chicago
terminal area that are crucial to the commuter trains operated by Metra in its
Southwest Service Corridor
and that, in Metra's opinion, might be affected by the CSX/NS/CR transaction:
the Chicago Ridge
interlocking controlled by IHB/B&OCT; the Forest Hill interlocking
controlled by CSX; the Belt
Junction interlocking controlled by BRC; and the CP-518 interlocking controlled
pre-transaction by
Conrail and post-transaction by NS.

Conditions Directed To CSX. In its METR-8 pleading filed
February 23, 1998, Metra has
advised that it has reached, with CSX, a Letter Agreement that addresses
Metra's concerns at the Forest
Hill interlocking and that establishes a Joint Review Committee to address
issues respecting the Chicago
Ridge interlocking and the Belt Junction interlocking. See METR-8, Tab
A (copy of the Letter
Agreement). Metra, though it has withdrawn its request for conditions insofar
as such conditions were
directed to CSX, has called to our attention the last paragraph of the Letter
Agreement, which provides
that the Letter Agreement will be submitted into the record of this proceeding
and that CSX and Metra
"will seek from the Board confirmation of these understandings, that although
the attached agreement
does not seek or provide for the imposition of any conditions by the Board, the
submission of this
agreement will be considered by the Board as a representation that they will
comply with its terms."
Metra accordingly requests, on behalf of itself and CSX, that we confirm in our
decision approving the
CSX/NS/CR transaction that the contents of the Letter Agreement will be
considered by the Board as
representations to the Board that the parties will comply with the terms of the
Letter Agreement. METR-8 at 2.

Conditions Directed To NS. Metra has also indicated, in its
METR-8 pleading, that it has
withdrawn "for the time being" its request for a condition respecting CP-518.
See METR-8 at 3. Metra
premises this withdrawal upon: NS' claim that freight activity through the
CP-518 interlocking will
decrease post-transaction; NS' pledge to be bound by existing applicable
agreements between Conrail
and Metra, see CSX/NS-176 at 234; and NS' promise to participate in the
Joint Review Committee
established under the Letter Agreement with CSX, see METR-8, Tab B.

METRO-NORTH COMMUTER RAILROAD. MNCR operates, each week,
99 passenger
trains on its 97.5-mile Port Jervis line, which extends between Port Jervis,
NY, and Hoboken, NJ, and
which consists of two segments: a 66.2-mile segment between Port Jervis
and Suffern, which is owned
by Conrail; and a 31.3-mile segment between Suffern and Hoboken, which is owned
by NJT.(365) MNCR
claims that, at the present time, MNCR's and NJTRO's commuter trains(366) and Conrail's freight trains
co-exist on the Port Jervis line with relatively few problems.(367) MNCR anticipates, however, that there
will be, within the next few decades, substantial increases in commuter service
on the Port Jervis line.
MNCR further anticipates that, as a consequence of the CSX/NS/CR transaction,
there will also be,
within the years to come, substantial increases in freight service on the
Port Jervis line (which will be
assigned to NS).

MNCR, which contends that the anticipated increased number of trains, both
passenger and
freight, will require very careful scheduling and dispatching so as to prevent
the impairment of either
service, fears that the freight scheduling contemplated by NS will not properly
accommodate MNCR's
passenger trains. MNCR also fears that the dispatching function would suffer
if NS were to assume
dispatching control on the Port Jervis-Suffern segment, and were to remove
that function to a far-distant
location staffed by personnel unfamiliar with commuter trains. And, MNCR adds,
if NS were to assume
dispatching control on that segment, there would necessarily have to be a "hand
off" of every MNCR
train at Suffern (because dispatching control of the Suffern-Hoboken segment
will remain with NJTRO).
It would be far better, MNCR contends, to retain the "hand off" at its present
location (CP Sparrow, at
Port Jervis), which is just beyond the end of the commuter passenger service
territory.

MNCR's Purchase Condition. MNCR therefore asks that we require
that the Port Jervis-Suffern
segment be conveyed to MNCR, subject to a reservation of trackage rights in
favor of NS (PRR).(368)
MNCR also asks: that the purchase price be set at $9.8 million, the price upon
which MNCR and
Conrail had reached a tentative understanding before their negotiations were
disrupted by the pending
CSX/NS/CR transaction; and that any other terms respecting the purchase, if not
agreed to by MNCR
and NS, be subject to arbitration or a similar process. MNCR adds: that it
stands ready to accept the
segment "as is" based on the price it agreed upon with Conrail; that it would
retain the status quo as
respects dispatching; and that it is prepared to contribute its appropriate
share of funding to put the
segment into proper condition for operation of a modern, reliable rail
passenger service in conjunction
with reasonable levels of freight service.

MNCR's Extension Condition. MNCR contends that, if we do not
impose its purchase condition,
we should at least require that NS agree to a long-term extension of the
existing MNCR/Conrail trackage
rights agreement, which extension (MNCR claims): would resolve, to some
extent, MNCR's concerns
respecting the conditions NS might otherwise impose upon MNCR's operations on
the Port Jervis-Suffern segment; and would allow MNCR to justify at least some
investment of public funds in the
rehabilitation of that segment.

NORTHEAST OHIO METRO. The METRO Regional Transit
Authority (referred to as
METRO or, on occasion, Northeast Ohio METRO) operates a mass transit system
transporting citizens
of Summit County within the Cleveland-Akron-Lorain Consolidated Metropolitan
Statistical Area.
METRO contends: that it has invested substantial resources in the development
of a commuter rail
transportation system intended to link the cities of Canton, Akron, and
Cleveland (the CAC corridor);
that Conrail's Hudson-Cleveland line is a key component of, not simply "one
option" for, the CAC
corridor; that the CSX/NS/CR application contemplates the assignment of the
Hudson-Cleveland line to
NS; that METRO is concerned that the rail realignments likely to follow the
CSX/NS/CR transaction will
have serious impacts on future commuter rail operations; and that METRO fears
that, without guaranteed
conditional commuter rail operating rights, these realignments will jeopardize
the efficient
implementation of commuter rail in Northeast Ohio. METRO therefore asks that
we require that
METRO be granted conditional commuter rail operating rights on Conrail's
Hudson-Cleveland line.
METRO adds, in its brief, that, if we do not impose its operating rights
condition, we should at least
require that NS and METRO negotiate a mutually binding agreement to mitigate
the impacts of the
CSX/NS/CR transaction on planned commuter rail service.(369)

VIRGINIA RAILWAY EXPRESS. VRE, a commuter railroad owned
by the Northern
Virginia Transportation Commission (NVTC) and the Potomac and Rappahannock
Transportation
Commission (P&RTC), operates 24 passenger trains per weekday over two
routes: the Manassas route,
which runs 35 miles between Manassas, VA, and Washington, DC; and the
Fredericksburg route, which
runs 55 miles between Fredericksburg, VA, and Washington, DC.(370) The two routes, which share a
common segment, run over tracks now owned by CSX, NS, Conrail, and Amtrak.
NVTC and P&RTC
claim that their present relationships with the three freight railroads over
whose tracks VRE operates are
not entirely satisfactory. The Operating Access Agreements pursuant to which
VRE's operations are
conducted, NVTC and P&RTC claim: require NVTC and P&RTC to indemnify
the freight railroads for
any damages that would not have occurred "but for" the existence of VRE's
service, including damages
attributable to the gross negligence of the freight railroads themselves;(371) provide the freight railroads
with unilateral powers to cancel or delay VRE trains, to impose schedule
changes and restrictions, and to
compel VRE to make capital improvements; and allow the freight railroads the
right to force VRE to
discontinue operations on short notice for any reason. NVTC and P&RTC
claim that CSX and NS, citing
the demands imposed by their existing freight train schedules, have thwarted
efforts to expand VRE's
operations. NVTC and P&RTC further claim that, apparently for the same
reason, they have been unable
to reach agreement with CSX and NS with respect to capital improvements that
NVTC and P&RTC
would like to make. NVTC and P&RTC add: that CSX's dispatchers have made
little effort to
accommodate VRE's schedules; that CSX's managers, when arranging maintenance
work on the CSX
lines, have similarly made little effort to accommodate VRE's schedules; and
that the resulting
deterioration in the on-time performance of VRE's trains has led to a decrease
in the number of VRE
riders.

NVTC and P&RTC are concerned that the likely substantial
post-transaction increases in freight
traffic on these lines will result in a further deterioration of VRE's commuter
service; any capacity
enhancements resulting from VRE's own investments in the rights-of-way may well
be eroded even
before VRE can operate any new service; and the infrastructure improvements
that applicants intend to
undertake will wreak havoc with VRE's commuter schedules. NVTC and P&RTC
claim that applicants
have not even attempted to address freight-passenger conflicts through
"structural" undertakings
designed to ensure accommodation of passenger operations, but have proposed to
avoid any negative
impact on passenger operations solely by better scheduling of freight train
operations. NVTC and
P&RTC contend that, in these circumstances, applicants' claims that VRE's
operations will not be
adversely affected by the CSX/NS/CR transaction cannot be taken seriously.
NVTC and P&RTC
therefore ask that we require the modification of the terms and conditions
provided for in the Operating
Access Agreements pursuant to which VRE's operations are presently conducted.(372)

CSX Access Agreement. If the terms and conditions provided for in
the CSX Access Agreement
were modified in the manner requested by NVTC and P&RTC: (1) the CSX
Access Agreement would
henceforth apply to the Conrail line between RO Interlocking in Arlington
and Virginia Avenue
Interlocking in Washington; (2) CSX would continue to have the authority to
grant to third parties new
rights to use the CSX line, but any grant of such rights to third parties made
after January 10, 1995,
would be subject to the current rights (at the time of such grant) of
NVTC/P&RTC with respect to that
line; (3) CSX would continue to have the authority to approve or reject any VRE
commuter rail service
modifications proposed by NVTC/P&RTC, but CSX would have to explain any
denial of any such
proposed modifications; (4) CSX's right to charge NVTC/P&RTC for capital
improvements made by
CSX would be limited to capital improvements required by law; (5) CSX would be
required to submit to
arbitration disputes between CSX and NVTC/P&RTC regarding the
responsibilities of each for capital
improvements in connection with expansion of VRE service; (6) CSX would no
longer have the right to
charge NVTC/P&RTC for revenue losses attributable, in CSX's view, to the
presence of VRE commuter
rail service; (7) a portion of the compensation paid to CSX would be dependent
upon on-time
performance standards; and (8) the termination date of the CSX Access
Agreement, which is presently
set as June 30, 1999, would be extended to June 30, 2008.(373)

NS Access Agreement. If the terms and conditions provided for in
the NS Access Agreement
were modified in the manner requested by NVTC and P&RTC: (1) NS would
continue to have the
authority to grant to third parties new rights to use the NS line, but any
grant of such rights to third
parties made after September 1, 1996, would be subject to the current rights
(at the time of such grant) of
NVTC/P&RTC with respect to that line; (2) NS would be required to
explain any denial of changes
proposed by NVTC/P&RTC in the schedule for VRE service; (3) NVTC and
P&RTC would continue to
be obligated to pay for capital improvements occasioned or required by VRE's
commuter operations, but
NS would be required to submit to arbitration disputes respecting whether and
to what extent NVTC and
P&RTC should be required to pay for such capital improvements; (4) the
termination date of the NS
Access Agreement, which is presently set as July 15, 1998, would be extended to
July 31, 2006;
(5) NVTC and P&RTC would be required to work in good faith to develop
a plan to purchase, lease, or
acquire an interest in the NS line (they are presently required to work in good
faith to develop a plan to
purchase the line), and NS and NVTC/P&RTC would be allowed to submit to
arbitration unresolved
disputes respecting this matter; and (6) a portion of the compensation paid to
NS would be dependent
upon on-time performance standards.(374)

APPENDIX E: SHIPPER ORGANIZATIONS

AFBF, AFIA, NCBA, NCGA, & NPPC. The American Farm
Bureau Federation (AFBF), the
American Feed Industry Association (AFIA), the National Cattlemen's Beef
Association (NCBA), the
National Corn Growers Association (NCGA), and the National Pork Producers
Council (NPPC)(375)
believe that the CSX/NS/CR transaction, if properly implemented, will benefit
the agricultural sector, but
are concerned that implementation may be marred by logistical problems. AFBF,
AFIA, NCBA, NCGA,
and NPPC contend that strong oversight will be needed in the short term to
ensure that service problems
are minimized and that applicants' proposed operating plans are carried out as
promised. AFBF, AFIA,
NCBA, NCGA, and NPPC therefore propose that we conduct periodic public hearings
and require an
annual report that evaluates how well the transition is proceeding, especially
as it relates to agriculture.

The annual report envisioned by AFBF, AFIA, NCBA, NCGA, and NPPC would
consist of six
sections. (1) A "general overview" section would describe actions taken during
the year, with
comparisons between plans and accomplishments. (2) A "service" section would
focus on the new routes
proposed by each carrier, and would describe in detail whether each is
operational, the new services
provided, and rate changes for selected commodities relative to those of a
historical base period (e.g.,
1995-97). (3) An "operating savings and other cost reductions" section
would describe, for each carrier,
the degree to which such savings and reductions have been realized relative to
those expected and also
relative to the base period. (4) An "increased competition" section would
indicate, using selected
measures, how competitive the new system is relative to expectations and
relative to the base period.
(5) An "other impacts" section would include descriptions of changes in
specific characteristics of the
system, and compare current operations relative to the base period for (among
others) single-line
operations, computer integration, new and improved routes, service reliability,
equipment utilization and
availability, terminal delays, and capital investment. (6) An "increased
services for agriculture" section
would address applicants' claims that the CSX/NS/CR transaction will yield a
number of expected,
specific benefits to agriculture.

CMA & SPI. The Chemical Manufacturers Association
(CMA) and The Society of the Plastics
Industry, Inc. (SPI), insist that the CSX/NS/CR transaction should not be
approved.(376)

Opposition to the CSX/NS/CR Transaction. (1) CMA and SPI warn
that captive traffic, including
long-distance chemicals/plastics (C/P) movements, is likely to suffer as the
CSX/NS/CR transaction is
implemented, both from impaired service (as applicants' systems become more
congested) and from
upward pressure on rates (as applicants' costs escalate). CMA and SPI
maintain: that the revenue
growth needed to pay for the CSX/NS/CR transaction depends on an almost
faultless execution by CSX
and NS of a strategy of capturing increasing volumes of marginally profitable
traffic using an intricate
"spider web" network of yards, while simultaneously reducing employment levels
and locomotive
power; that the intermodal traffic upon which CSX and NS are relying will be
subject to competition
from trucks and, largely on account of this competition, will generate
relatively low per-car revenues;
that, because the per-car revenues will be relatively low, CSX and NS will have
to haul a great deal of
additional intermodal traffic, the efficient movement of which will require
more personnel and more
locomotives; but that, despite all of the new traffic CSX and NS project, and
despite the increased
handling this traffic will require, the financial pressures created by the debt
CSX and NS have incurred
have led CSX and NS to project reductions both in their employment levels and
in their locomotive
fleets.

(2) CMA and SPI contend that the CSX/NS/CR transaction represents an
unprecedented effort to
disaggregate a major railroad's operations and to parcel out to three railroads
(CSX, NS, and the post-transaction Conrail) the traffic that now flows over
one. The complexity of this dismemberment, CMA
and SPI warn, increases the likelihood of massive confusion, disruption, and
delay, particularly in view
of the fact that CSX and NS do not have, and prior to the Control Date will not
have, full knowledge of
the details of Conrail's operations, its data processing systems, its
communications systems, its costs, its
traffic base, and its contracts. CMA and SPI fear, however, that, under the
pressure of the financial
demands imposed by the debt that CSX and NS have incurred, CSX and NS will
attempt to implement
the CSX/NS/CR transaction as soon as possible after the Control Date.

(3) CMA and SPI contend that the operations envisioned by CSX and NS in the
three SAAs will
be especially difficult. CMA and SPI claim: that CSX and NS have not
explained how three railroads
can be expected to operate over tracks that now have sufficient line capacity
for only one; that
dispatching and operations in the SAAs are likely to be hampered by the rivalry
of CSX and NS; and that
arbitration, applicants' chosen remedy for disputes respecting operations in
the SAAs, will prove to be a
cumbersome and time-consuming way to run a railroad.

(4) CMA and SPI contend that, in any event, the creation of the SAAs will
not result in rail-to-rail competition for all traffic moving from/to points in
those areas. CMA and SPI insist: that, if the
other end of a movement is open only to CSX or only to NS, there will be no
competition; that the SAAs
are not "shared" in all respects, in that some facilities (such as bulk
chemical terminals at Croxton, NJ,
and Eastside Yard in Philadelphia, PA) are off limits either to CSX or to NS;
and that, even though
certain other bulk chemical facilities may be open to both CSX and NS, there
are many reasons why such
facilities may not be fungible or equally accessible to shippers or customers
in the area.(377)

(5) CMA and SPI contend that the CSX/NS/CR transaction will provide new
single-line service
to relatively few C/P shippers, will eliminate single-line service for many C/P
shippers, and will likely
impair service for many additional C/P shippers.(378) Applicants, CMA and SPI fear, have no
plans to
remedy the transaction-related harms to C/P shippers whose pre-transaction
Conrail single-line service
will be eliminated or whose pre-transaction service will otherwise be impaired.

(6) CMA and SPI contend that there is a potential for higher rates if CSX
and NS attempt to shift
traffic away from the gateways used today (the St. Louis/Illinois
gateways) to gateways that would give
CSX and NS longer hauls (New Orleans and Memphis). CMA and SPI fear that
C/P shippers will be
whipsawed between the western carriers' desire to preserve their revenues and
the eastern carriers' desire
to preserve their margins but on longer hauls.

CMA/SPI Conditions. CMA and SPI therefore ask that we impose:
(A) certain Pre-Implementation Conditions;(379) (B) certain SAA Conditions; and (C)
certain Oversight and Other
Conditions. CMA and SPI insist that, because the provisions of the NITL
agreement fall short, in many
respects, of the protections that would be afforded by the CMA/SPI conditions,
we should adopt the
CMA/SPI conditions in lieu of those contained in the NITL agreement.

Condition A.1, which would have to be satisfied prior to implementation,
would require CSX
and NS: to establish the necessary management and operations protocols; and to
integrate the
Management Information Systems established for the SAAs into the Management
Information Systems
in place on the overall CSX and NS systems.

Condition A.2, which would have to be satisfied prior to implementation,
would require CSX
and NS to adopt all existing tariffs and circulars that were in effect on June
23, 1997, and to publish
supplements incorporating new routes.(380)

Condition A.3, which would have to be satisfied prior to implementation,
would require CSX
and NS: to put in place labor implementing agreements; to complete all
necessary safety and other
training; and to familiarize personnel with the new territories.

Condition A.4, which would have to be satisfied prior to implementation,
would require CSX
and NS to extend their own Management Information Systems, particularly their
car tracking systems, to
their respective portions of Conrail.

Condition A.5, which would have to be satisfied prior to implementation,
would require CSX
and NS to complete the construction projects covered by STB Finance Docket No.
33388 (Sub-Nos. 1, 2,
3, 4, 5, 6, and 7).(381)

Condition B.1 would require each of CSX and NS to be fully responsible and
liable for its
shipments to/from/within the SAAs.(382)

Condition B.2 would require that all existing bulk C/P transloading
terminals located within the
SAAs, including rail-to-truck terminals, be open to both CSX and NS.(383)

Condition B.3 would require that all new facilities within the SAAs be open
to both CSX and
NS.(384)

Condition B.4 would provide that, where the CSX/NS/CR transaction creates,
for contract
shippers of traffic to/from/within the SAAs, new competitive options (i.e., new
options for traffic not
moving to/from closed points on CSX or NS): (a) each shipper must have an
"open season" (not to
exceed 2 years from the date of transaction implementation) to test service
from both CSX and NS under
Conrail contracts; (b) each shipper must have the right to decide whether
to have Conrail contract service
performed by CSX or NS or both; and (c) each shipper must have an option
to reopen its Conrail
contracts.(385)

Condition C.1: (a) would require CSX and NS to keep open all existing
gateways and
interchanges on competitive rate and service terms;(386) and (b) for Conrail single-line traffic
that becomes
CSX-NS or NS-CSX interline traffic, would prohibit increases (greater than
RCAF-A increases) on rates
in effect on June 23, 1997.(387)

Condition C.2: (a) would require CSX and NS to keep open all reciprocal
switching points on
CSX/NS/Conrail that were open to reciprocal switching on June 23, 1997; (b)
would require CSX and
NS to set reciprocal switching charges between CSX and NS within Conrail
territory (i.e., the territory
now served by Conrail) at $130 per car;(388)
(c) would require CSX and NS, respectively, to eliminate all
reciprocal switching charges on all former Conrail-CSX and Conrail-NS interline
movements that
become CSX and NS single-line movements;(389)
and (d) would require that reciprocal switching be
reinstated at Buffalo (apparently by CSX and NS) and at Niagara Falls
(apparently by CSX).(390)

Condition C.3 would require: that CSX and NS be held to the
post-transaction transit times
presented in the operating plans and train schedules submitted in this
proceeding; and that CSX and NS
service not reflected in their operating plans and train schedules be monitored
to ensure that service on
their pre-transaction systems does not deteriorate post-transaction.

Condition C.4 would require: (a) that CSX and NS file quarterly reports
with the Board;(391) and
(b) that there be 5 years of Board oversight of the CSX/NS/CR transaction.(392)

Condition C.5 specifies that the oversight proceedings would address eight
general issues: (a)
safety performance; (b) customer transit times in key corridors (both new
and existing CSX and NS
service); (c) service efficiency gains (e.g., run-through trains and
286,000-pound gross rail load routes);
(d) maintenance of shipper gateway and interchange options on competitive
rate and service terms; (e)
attainment of projected new traffic volumes; (f) realization of projected cost
savings; (g) post-transaction
financial ratios; and (h) effects of the purchase price and premium paid for
Conrail, and the financial
justification for the transaction.

CPTA. CPTA contends that the CSX/NS/CR transaction should
be approved only if four
implementation conditions, four oversight conditions, and four additional
conditions are imposed. CPTA
also contends that we should take no action that would effectively nullify any
antiassignment clauses
contained in Conrail's Existing Transportation Contracts.

Implementation Conditions. Implementation Condition #1: would
require the joint submission
by applicants of a plan for operations within the SAAs, and would provide for a
period for comment by
shippers, followed by approval of the plan by the Board. CPTA contends: that
operations within the
SAAs are critical to the pro-competitive features of the CSX/NS/CR transaction;
that, however, train
operations into, out of, and within the SAAs are likely to be extremely
complex; and that, accordingly, it
is absolutely necessary that CSX and NS have in place, prior to Day One, a
detailed operational plan with
operational "metrics" that will enable the Board to monitor the success of
operations within the SAAs
when they commence.

Implementation Condition #2 would require CSX and NS to certify, prior to
implementation of
the CSX/NS/CR transaction, that they have put in place all necessary labor
agreements (i.e., all labor
agreements necessary to implement operations within the SAAs, all labor
agreements necessary to
implement operations on the other Conrail properties to be acquired by CSX and
NS, and all labor
agreements necessary to implement operations on properties already owned by CSX
and NS insofar as
such operations will be integrated with operations on the properties to be
acquired from Conrail). Recent
experience, CPTA claims, indicates that implementation of labor agreements is
critical to the successful
implementation of a rail consolidation.

Implementation Condition #3 would require CSX and NS to certify, prior to
implementation of
the CSX/NS/CR transaction, that they have put in place the management
information systems, including
car tracking systems, necessary to manage operations on the former Conrail
system, within the SAAs,
and at interchanges between the merged CSX/Conrail and NS/Conrail systems.

Implementation Condition #4: would require CSX and NS to submit a plan as
to how revenues,
costs, and responsibilities for rail transportation contracts for movements
from, to, or within the current
Conrail system are to be handled; and would provide for a period for comment by
shippers, followed by
approval of the plan by the Board. CPTA acknowledges that applicants have
already submitted a "plan"
of this nature. See CSX/NS-25, Volume 8B at 25-29. CPTA contends,
however: that, although the
arrangements contemplated by applicants are extraordinarily complex, many
uncertainties still surround
this issue; that shippers with current Conrail contracts, and particularly
those with contracts respecting
movements from or to the SAAs, still do not know which carrier or carriers will
handle their traffic,
and/or what choice they will have over the selection of that carrier
post-transaction; and that this
uncertainty has the potential for enormous confusion.

Oversight Conditions. Oversight Condition #1 would provide for
continuing oversight of the
implementation and effect of the CSX/NS/CR transaction for a 5-year period.

Oversight Condition #2 would require CSX and NS to file quarterly and
yearly reports, and
would provide for a comment period for shippers and other interested parties.

Oversight Condition #3 would require CSX and NS to include, in their
quarterly and yearly
reports: (1) progress reports on key aspects of the transaction, such as
the division and integration of the
Conrail locomotive and freight car fleet, customer billing, and capital
investment; (2) statistics on
operations, such as number of employees in key categories, number of
locomotives available, etc.; (3)
key service statistics against a baseline (number of turns per month for key
equipment groups, train
starts, etc.); (4) status and progress reports on implementation of operations
in the SAAs; (5) reports on
experience in truck market penetration; (6) rate trends, by key commodity
groups, against a baseline; and
(7) financial performance indicators.

Oversight Condition #4 would require the Board to develop objective and
measurable standards
to determine if the transaction is resulting in benefits to the shipping public.

Additional Conditions. Additional Condition #1 would impose upon
the CSX/NS/CR transaction
the transload, new facility, and build-out conditions that were imposed upon
the UP/SP merger. CPTA
insists that, even though the number of 2-to-1 and similar points in this
proceeding is relatively small, a
shipper whose competitive options are directly restrained as a result of the
CSX/NS/CR transaction
should receive no less protection than was afforded shippers whose competitive
options were directly
restrained by the UP/SP merger.(393)

Additional Condition #2 would require CSX and NS to keep open for
reciprocal switching all
reciprocal switching points that would provide post-transaction transportation
options for shippers.
Reciprocal switching, CPTA contends, constitutes one of the few ways in which
rail-to-rail competition
can be brought to bear in the increasingly concentrated rail marketplace. The
preservation of reciprocal
switching, CPTA adds, would be consistent with the creation of SAAs and other
newly competitive
points, and indeed would insure that the benefits of competition in those areas
and at those points
actually accrue to shippers.

Additional Condition #3 would require a reduction of reciprocal switching
charges to a
maximum level of $130 per car, the level (CPTA notes) that was agreed upon by
the UP/SP applicants.(394)

Additional Condition #4 would require CSX and NS to propose, by no later
than 30 days after
the decision,(395) a plan to protect, for a
period of at least 5 years after implementation of the CSX/NS/CR
transaction, the current single-line rates and service (including efficient
means of interchange) of each
"single-line to joint-line" (hereinafter, SL-to-JL) shipper. CPTA contends:
that SL-to-JL shippers may
be seriously disadvantaged as a result of the CSX/NS/CR transaction, not only
with respect to rates but
also with respect to service; that there are a variety of possible remedies
(trackage rights, extension of
reciprocal switching limits, run-through power and crews, contract guarantees,
etc.); that CSX and NS
should be required to submit to each SL-to-JL shipper a written proposal for
protecting that shipper's
rates and service for a period of 5 years after the effective date of the
transaction; that the shipper should
be given the right to accept or reject the proposal, and should be given the
further right to request the
Board to adjudicate any dispute respecting a rejected proposal; and that the
Board should order specific
relief if it finds that the carriers' proposal is not likely to provide the
shipper with the same rates and
service that the shipper enjoyed prior to the transaction.

Antiassignment Clauses. Applicants have requested, in the lead docket, a
declaratory order, or a
declaration to the same effect as a declaratory order, that, by virtue of the
immunizing power of
49 U.S.C. 11321(a), CSX and NS may use, operate, perform, and enjoy the
Allocated Assets and the
assets in the SAAs consisting of assets other than routes (including, without
limitation, the Existing
Transportation Contracts) as fully and to the same extent as Conrail itself
could. CPTA insists, in
essence, that, if we issue the sought declaratory order, we should make clear
that it is not intended to
result in the nullification of an Existing Transportation Contract's
antiassignment clause (i.e., a clause
that purports to bar the assignment of the contract by Conrail without the
consent of the shipper). See
NITL-7 at 38 n.11. CPTA notes that an antiassignment clause, if allowed to
take effect, would enable a
shipper located within an SAA to obtain the benefits of CSX vs. NS
competition immediately.
Nullification of such a clause, CPTA adds, would unlawfully strip the shipper
of its contract rights, and
would allow CSX and NS to decide among themselves which carrier should perform
under the contract.

CPTA, NITL, & TFI. The National Industrial
Transportation League (NITL), the U.S. Clay
Producers Traffic Association, Inc. (CPTA), and The Fertilizer Institute (TFI)
insist that captive shippers
should not be asked to shoulder the financial burdens of the CSX/NS/CR
transaction.(396)

Acquisition Premium. NITL, CPTA, and TFI fear that the financial
demands of the CSX/NS/CR
"acquisition premium" may cause CSX and NS to increase the rates charged to
their captive shippers.(397)
NITL, CPTA, and TFI contend: that the new debt that CSX and NS have incurred
to finance the
CSX/NS/CR transaction will place enormous pressures on CSX and NS for years to
come; that the new
competition that will be created in certain areas, and particularly in the
SAAs, will exert downward
pressures on the rates that CSX and NS can charge shippers in those areas; and
that CSX and NS will
therefore be tempted to increase the rates charged to their captive shippers.
NITL, CPTA, and TFI
acknowledge applicants' claims that the costs of the CSX/NS/CR transaction will
be paid for by
operational efficiencies and traffic gains. NITL, CPTA, and TFI indicate,
however, that they are
skeptical that such efficiencies and gains will suffice.

NITL, CPTA, and TFI claim that the threat posed by the demands of the new
debt incurred by
CSX and NS is heightened by the fact that, given the current regulatory
structure, the CSX/NS/CR
acquisition premium will distort the limited regulatory protections now
available to captive shippers.
This, they claim, will happen in two ways: one involving revenue adequacy
determinations and the
revenue adequacy constraint; and the other involving the jurisdictional
threshold computation.

(1) NITL, CPTA, and TFI note that acquisition costs are used to determine
the investment base
used in revenue adequacy calculations. Railroad Revenue Adequacy - 1988
Determination, 6 I.C.C.2d
933, 940-42 (1990). NITL, CPTA, and TFI claim that, as respects the CSX/NS/CR
transaction, the use
of acquisition costs will increase the investment base (for both CSX and NS)
and increase depreciation
expenses (for both CSX and NS), which effects, in combination, will reduce the
reported return on
investment of both CSX and NS and thereby make each of these carriers appear to
be either less revenue
adequate or more revenue inadequate. NITL, CPTA, and TFI contend that this
result: will be perverse,
given that CSX and NS claim that the CSX/NS/CR transaction will make each
stronger and more
effective; and will be particularly perverse as respects the presently revenue
adequate NS, which will
escape the revenue adequacy constraint of our Constrained Market Pricing
maximum rate reasonableness
guidelines if the use of its portion of the acquisition premium in determining
its investment base causes it
to be considered revenue inadequate. SeeCoal Rate Guidelines,
Nationwide, 1 I.C.C.2d 520, 534-37
(1985) (Coal Rate Guidelines).

(2) NITL, CPTA, and TFI note: that the market dominance finding necessary
to establish our
rate reasonableness jurisdiction cannot be made if the rate at issue results in
a revenue to variable cost
ratio (R/VC ratio) of less than 180%, see
49 U.S.C. 10707(d)(1)(A); and that, for purposes of
determining the R/VC ratio, variable costs are calculated under the Uniform
Rail Costing System
(URCS), see 49 U.S.C. 10707(d)(1)(B). NITL, CPTA, and TFI claim
that, if acquisition costs are used to
determine the post-transaction CSX and NS investment bases: the increase in
the basis of CSX's and NS'
assets that will be a consequence of the acquisition premium will result, under
URCS, in an increase in
those variable costs that are calculated by reference to asset value; the
increase in variable costs will
result in an increase in the dollar value of the R/VC 180% ratio; and the
increase in the dollar value of
the R/VC 180% ratio will allow CSX and NS to increase, free of regulatory
oversight, all rates that are
below the increased dollar value of that ratio (and every dollar of increased
variable cost will allow CSX
and NS to increase rates, free of regulatory oversight, by $1.80). NITL, CPTA,
and TFI add that the
180% jurisdictional threshold is particularly important in the case of many
bulk movements, because the
calculation of the stand-alone cost constraint (SAC) under Coal Rate
Guidelines is below the 180%
jurisdictional threshold (and therefore, for such movements, the 180%
jurisdictional threshold is, for all
practical purposes, the maximum reasonable rate level).(398)

Bottleneck Matters. NITL, CPTA, and TFI claim that,
although the CSX/NS/CR application
envisions the creation of new rail-to-rail competition in the SAAs and in the
other areas in which there
will be two-carrier service, many shippers in the newly competitive areas will
not actually enjoy the
benefits of rail-to-rail competition. NITL, CPTA, and TFI insist that the
culprit is our 1996 BottleneckI
decision(399) which, they claim, stands for
the proposition that, where traffic moves from/to a point in one
of the newly competitive areas to/from a point served exclusively either by CSX
or by NS, the carrier
with access to the exclusively served point will be able to exclude the other
carrier from participating in
the traffic. NITL, CPTA, and TFI therefore contend that the only shippers
within the newly competitive
areas that will actually enjoy rail-to-rail competition will be those shippers
whose traffic moves from/to a
point in the newly competitive areas: to/from a point open to both CSX and NS
(either a point presently
open to both CSX and NS or a point in one of the newly competitive areas); or
to/from a neutral
interchange carrier (i.e., a carrier other than CSX and NS).

Loss of Competition. NITL, CPTA, and TFI claim that, in at least
three respects, the
CSX/NS/CR transaction is likely to result in the diminution of competition.

(1) NITL, CPTA, and TFI claim that competition will be lost on account of
the reduction in
neutral, competitive rail routings. NITL, CPTA, and TFI contend: that where a
shipper's plant is served
by one railroad (here, Conrail), but there are two or more unaffiliated
railroads physically able to
transport the freight from an interchange to the destination (here, CSX and
NS), the shipper receives the
benefit of competition between the neutral destination rail carriers; that,
however, when the origin
monopoly carrier merges with one of the destination carriers, the shipper loses
the benefits of the pre-transaction competition; that, in the CSX/NS/CR
transaction, this phenomenon will occur on a massive
scale (with respect to those Conrail points that will be exclusively served
either by CSX or by NS); and
that, as a consequence thereof, traffic that would have had the benefit of CSX
vs. NS competition on at
least part of the move will become captive to one of the carriers over the
entire movement. NITL,
CPTA, and TFI concede that the "one-lump" theory holds that where a rail
carrier (here, Conrail)
controls any portion of a movement, the whole "lump" of monopoly profits is
taken by that carrier, so
that the merger of the monopoly carrier with one of the competing destination
carriers should make the
shippers no worse off. NITL, CPTA, and TFI contend, however, that this agency
has never performed
empirical studies to determine whether this theory conforms to reality.

(2) NITL, CPTA, and TFI claim that competition will be lost on account of
the elimination of
multiple-plant leverage. NITL, CPTA, and TFI contend: that where a shipper
served by a single rail
carrier (here, Conrail) at one location has a plant producing the same or
similar products at another
location on the line of another carrier (here, CSX or NS), that shipper may, in
some instances, have a
certain amount of leverage for use in negotiating with each carrier, at least
where the two plants are not
running at or near capacity; but that this form of competition will be
eliminated by the CSX/NS/CR
transaction, insofar as plants that used to be on Conrail on the one hand and
either CSX or NS on the
other hand become totally CSX or NS origins or destinations.

(3) NITL, CPTA, and TFI claim that competition will be lost on account of
the greater
geographic spread of CSX and NS. NITL, CPTA, and TFI contend: that, to the
extent competing
shippers are served by different carriers, each carrier has an interest in
seeing that its shippers are not
disadvantaged vis-à-vis shippers on other carriers, at least if there is
excess manufacturing capacity and
at least to the extent of the marginal production; but that this form of
competition will be diminished by
the CSX/NS/CR transaction, as more and more producers of a product are located
on the lines of a single
carrier.

Post-Implementation Rate Conditions. NITL, CPTA, and TFI
therefore ask that we impose three
post-implementation rate conditions. NITL, CPTA, and TFI claim that these
"safety net" conditions
would operate only in the event that CSX and NS, having failed to generate the
additional revenues and
savings they expect, attempt to obtain the revenues they need by exercising
market power over captive
shippers.(400)

Rate Condition #1 would provide that, for a period of 5 years after the
CSX/NS/CR transaction,
qualitative market dominance will be presumed for any CSX or NS shipper served
by only one railroad if
the rates to that shipper are increased by an amount greater than that set
forth in Rate Condition #2.

Rate Condition #2 would provide that, for a period of 5 years after
approval of the CSX/NS/CR
transaction, CSX and NS will bear the burden of proving the lawfulness of any
rate increase for market
dominant shippers that exceeds the RCAF-U.(401)

Rate Condition #3 would provide that the acquisition premium shall affect
neither the
determination of revenue adequacy for CSX and NS nor the determination of the
jurisdictional threshold
for CSX and NS rate reasonableness cases.

NITL Settlement Agreement. In December 1997, CSX
and NS entered into a settlement
agreement (referred to as the NITL agreement)(402) with NITL, the largest trade association of
shippers in
the United States.(403)

Conrail Transaction Council. Section I(A) of the NITL agreement
provides for the creation, by
February 1, 1998, of a Conrail Transaction Council (the Council), which shall
consist of representatives
from CSX, NS, and NITL, and also any other organization of affected rail users,
and which shall serve as
a forum for constructive dialogue. Section I(A) further provides: that CSX
and NS shall discuss the
implementation process with the Council; that the Council may present to CSX
and NS mechanisms to
identify and address any perceived obstacles to the effective and efficient
implementation of the
CSX/NS/CR transaction, and may convey to CSX and NS any particular concerns or
recommendations
with respect to implementation planning or the implementation process; and that
CSX and NS shall
endeavor to address such presentations, concerns, or recommendations, and shall
report to the Council on
the actions taken with respect thereto or the reasons for taking different
actions. Section I(A) also
provides that the Council is not intended to supplant our oversight of the
CSX/NS/CR transaction (which
is provided for by section II(A) of the NITL agreement).

Shared Assets Areas Summary Description. Section I(B) of the
NITL agreement provides that
CSX and NS shall provide, by February 1, 1998, a "summary description" of how
operations will be
conducted in each of the three SAAs. Section I(B) further provides that the
summary shall focus on the
function and interrelationship of the various crews of each railroad,
dispatching controls, and the effect
on individual shippers in matters such as car ordering, car supply, and car
location.

Labor Implementing Agreements. Section I(C) of the NITL agreement
provides: that CSX and
NS will implement the CSX/NS/CR transaction as soon after the Control Date as
possible; that CSX and
NS will obtain the necessary labor implementing agreements prior to the Closing
Date, and will advise
the Board when such agreements have been obtained; and that NITL will support a
request by CSX or
NS that we initiate the labor implementing agreement process prior to the
Control Date.

Management Information Systems. Section I(D) of the NITL
agreement provides that, prior to
the Closing Date, CSX and NS will advise the Board that management information
systems (including
car tracking capabilities) designed to manage operations on the former Conrail
system, within the SAAs,
and at interchanges between the CSX/Conrail and NS/Conrail systems, are in
place.

Oversight. Section II(A) of the NITL agreement provides that we
should require specific
oversight of the implementation and effect of the CSX/NS/CR transaction for a
3-year period. Section
II(A) further provides that it is not intended: to limit our authority to
continue oversight beyond the 3-year period; or to limit the right of any party
(including NITL) to request continued oversight if
conditions at the end of the 3-year period warrant such a request.

Reports. Section II(B) of the NITL agreement provides, with
respect to the continuing oversight
provided for by section II(A): that we should require quarterly reports
from CSX and NS; that we should
provide shippers an opportunity to comment; that CSX, NS, and the Council shall
jointly recommend
objective, measurable standards to be used in the reports filed by CSX and NS;
and that the base for
these standards shall be, to the extent the information is readily available,
the standards on Conrail prior
to the Control Date. Section II(B) further provides that, in addition to any
measurable standards,
information in the quarterly reports may include: status of implementation
plans for operations in the
SAAs; status of labor implementing agreements; status of integration of
management information
systems; status of allocation of responsibility for performing Conrail
transportation contracts; and any
other matters about which the Board or the Council reasonably requests
information.

Allocation of Transportation Contracts. Section 2.2(c) of the
Transaction Agreement provides
for the allocation, between CSX and NS, of Conrail's Existing Transportation
Contracts. See
CSX/NS-25, Volume 8B at 25-29 (providing, among other things, that where both
CSX and NS can
perform single-line transportation, CSX and NS will allocate among themselves
the responsibility for
providing service under an Existing Transportation Contract). Section II(C) of
the NITL agreement
provides that, beginning 6 months after the Closing Date, if a shipper whose
Existing Transportation
Contract has been allocated in whole or in part either to CSX or to NS is
dissatisfied with the service it is
receiving from the carrier performing the contract from specified origins to
specified destinations, it may
submit the matter to expedited binding arbitration (after written notice to the
carrier as to claimed
operating or other deficiencies below the level at which Conrail provided
performance of the contract,
and an opportunity of 30 days to improve its performance and cure those
deficiencies). Section II(C)
further provides: that the issue to be arbitrated shall be whether there is
just cause because of a
deficiency in performance to have the responsibility for the performance of the
contract (for the specified
origin/destination pairs) transferred; that, if such just cause appears, the
remedy shall be an order
transferring such responsibility of performance to the other carrier; and that
arbitration is to be concluded
within 30 days from the date the arbitrator is selected. Section II(C) also
provides that an arbitration
protocol for the selection of arbitrator(s) and the conduct of arbitration will
be developed by CSX, NS,
and NITL not later than July 1, 1998.

New Facilities Within the SAAs. Section III(A) of the NITL
agreement clarifies that the SAA
Operating Agreements generally provide: (1) that both CSX and NS will have
access to existing or new
shipper-owned facilities in the SAAs; (2) that both CSX and NS will have the
opportunity to invest in
joint facilities in the SAAs in order to gain access to such facilities; and
(3) that either CSX or NS may
solely develop, within the SAAs, facilities that it will own and control (such
as transloading facilities or
automotive ramps) that will be accessed exclusively by the railroad that
develops such facilities.

Reciprocal Switching. Section III(B) of the NITL agreement
provides that CSX or NS, as the
case may be, will cause any point at which Conrail now provides reciprocal
switching to be kept open to
reciprocal switching for 10 years after the Closing Date.

Reciprocal Switching Rates. Section III(C) of the NITL agreement
provides that, for 5 years
after the Closing Date, reciprocal switch charges between CSX and NS at the
points referred to in the
preceding paragraph will not exceed $250 per car, subject to annual RCAF-U
adjustment, and at other
points and/or with all other carriers will not exceed: (a) where no separate
settlement is made between
carriers, the existing rates subject to RCAF-U adjustment; or (b) where there
are such settlements, the
amount therein prescribed (not in excess of that provided for in (a)). Section
III(C) further provides that
it does not apply where CSX and NS have entered into agreements intended to
address so-called 2-to-1
situations as set forth in the CSX/NS/CR application.(404)

Gateways. Section III(D) of the NITL agreement clarifies that CSX
and NS anticipate that all
major interchanges with other carriers will be kept open as long as they are
economically efficient.

Interline Service. Section III(E) of the NITL agreement is
applicable to transportation services
to Conrail shippers on routes (i.e., origin-destination pairs) over which at
least 50 cars were shipped in
the calendar year prior to the Control Date in single-line Conrail service
(i.e., origin and destination
served by Conrail) which will become joint-line CSX-NS service after the
Closing Date. Section III(E)
provides that, upon request of an affected shipper, CSX and NS will, for a
period of 3 years, (a) maintain
the Conrail rate (subject to RCAF-U increases), and (b) work with the
shipper to provide fair and
reasonable joint-line service. Section III(E) further provides: that, if a
shipper objects to the routing
employed by CSX and NS, or to the point selected by them for interchange of its
traffic, the
disagreement over routing or interchange, or both, shall be submitted to
binding arbitration under the
procedures adopted in STB Ex Parte No. 560;(405) that the arbitrator shall determine whether
the route or
the point of interchange, or both, satisfies the requirements of 49 U.S.C.
10705; and that, upon a
determination that such requirements have not been satisfied, the arbitrator
may award a different route
or point of interchange for such traffic.(406)

Board Approval. Section III(F) provides that, except as provided
in this paragraph, the NITL
agreement: (a) is not subject to Board approval; and (b) will be binding on
the parties in the absence of
Board approval, except with respect to any provision disapproved by the Board
or inconsistent with the
Board's action on the CSX/NS/CR application. Section III(F) further provides
that the parties to the
NITL agreement will ask the Board to approve: the creation of the Council; the
exchange of
information; the process provided for addressing shipper implementation and
service concerns; and the
allocation of transprtation contracts under section II(C).(407) Section III(F) also provides that, in the
absence of such approval by the Board, CSX and NS shall not be obliged to take
any action which in
their sole judgment might create liability under the antitrust laws.

Post-Implementation Rate Conditions. ISRI contends:
(A) that we should impose a condition
stating that, for a period of 5 years after the transaction, market dominance
will be presumed for any
CSX or NS shipper served by only one railroad if the rates to that shipper are
increased by an amount
greater than the RCAF-U; (B) that we should impose a condition that would place
on the carriers, for a
period of 5 years after approval of the transaction, the burden of proving the
lawfulness of any rate
increase for market dominant shippers that exceeds the RCAF-U; and (C) that we
should impose a
condition stating that, for CSX and NS, the acquisition premium will affect
neither the determination of
revenue adequacy nor the determination of the rate reasonableness
jurisdictional threshold.

ISRI Member Conditions (SAAs). (A) Louis Padnos Iron & Metal
Company (LPIM) operates
two 1-to-1 ferrous scrap processing facilities near the Detroit SAA. Its
facility at Grand Rapids, MI, is
located approximately 150 miles west of Detroit; its facility at Lansing, MI,
is located approximately
80 miles west of Detroit. Each facility is presently rail-served by a
single carrier (CSX at Grand Rapids;
Conrail at Lansing) and each will be served by a single carrier
post-transaction (CSX at Grand Rapids;
NS at Lansing). Both facilities, however, compete with at least nine other
scrap processors located in the
Detroit SAA, all of which are presently rail-served exclusively by Conrail but,
post-transaction, will have
direct access to both CSX and NS. ISRI warns that, whereas LPIM (which ships
90% of its outbound
ferrous scrap product by rail) can now compete with its nine competitors on an
equal basis, it will not be
able to do so post-transaction. ISRI therefore asks that we grant a second
rail carrier access to the LPIM
facilities at Grand Rapids and Lansing. ISRI requests: (1) that, at
Grand Rapids, we grant trackage
rights to NS (which will acquire a nearby Conrail line) over the CSX line
serving the LPIM facility; and
(2) that, at Lansing, we grant trackage rights to CSX over the Conrail line (to
be assigned to NS) serving
the LPIM facility.

(B) William Reisner Corporation (WRC), which operates a single scrap
processing facility in
Clinton, MA, competes with other scrap processors in the North Jersey SAA and
the
South Jersey/Philadelphia SAA. ISRI claims that both WRC and its
competitors in the SAAs, all of
which are presently rail-served exclusively by Conrail, presently have access
to single-line Conrail
service, which keeps them on roughly comparable competitive footings in terms
of rates and car supply.
ISRI concedes that WRC is already at a slight disadvantage in freight rates
because, given its location in
Massachusetts, all of its traffic must move greater distances south toward its
principal markets. ISRI
notes, however, that, after the CSX/NS/CR transaction, WRC will be
single-served by CSX while its
competitors will gain dual service from CSX and NS; and ISRI warns that the
slight advantage that
WRC's SAA competitors enjoy today will be transformed into a major advantage
that will render WRC
noncompetitive. ISRI therefore asks that we grant trackage rights to B&M
over the Conrail line serving
the WRC facility. B&M, ISRI notes, could haul the traffic over its own
line to Mechanicville, NY, for
interchange with either NS or CP.

(C) Royal Green Corporation (RGC) operates a single ferrous scrap
processing facility in
Temple (Reading), PA; this facility lies approximately 40 miles from the
South Jersey/Philadelphia SAA
and 120 miles from the North Jersey SAA; and RGC's principal competitors are
located in these two
SAAs. RGC and its principal competitors are today rail-served exclusively by
Conrail. Post-transaction,
however, RGC will be served solely by NS while its competitors will have access
to both CSX and NS.
ISRI therefore asks that we grant a second rail carrier (such as CSX or CP)
trackage rights over the
Conrail line (to be assigned to NS) between RGC's Temple facility and
Philadelphia, with the right to
interchange traffic at Philadelphia. ISRI adds: (1) that, if the carrier
granted the trackage rights is not
CSX, we should require the carrier to absorb all switch charges on two-line
movements, or impose such
other condition as will provide rate levels comparable to a single-line
movement; and (2) that the
trackage rights should include access to Conrail's Reading Yard at which RGC
stores its private fleet of
railcars.

(D) ISRI claims that LPIM, WRC, and RGC are representative of a larger
group of ISRI
members who may also be harmed by the SAAs. ISRI therefore asks that we
condition the CSX/NS/CR
transaction in a way that would allow other similarly affected ISRI members to
obtain comparable relief.

ISRI Member Conditions (W&LE). ISRI supports the conditions
requested by W&LE to the
extent those conditions will alleviate harm to ISRI members. (1) Reserve Iron
& Metal, L.P., is
concerned about the loss of two-carrier access to its facility at Cleveland,
OH. Reserve therefore
supports W&LE Condition #9 (access by W&LE, apparently via trackage
rights, to Reserve's Cleveland
facility). (2) Annaco, Inc., operates scrap facilities in Ohio that are served
by W&LE. Annaco is
concerned that NS' acquisition of the Conrail lines in W&LE's territory may
bankrupt W&LE; and this,
Annaco fears, will adversely affect Annaco's competitiveness. Annaco has also
been displeased with
both CSX service and NS service; both CSX and NS, Annaco claims, have been less
dependable than
W&LE. Annaco therefore supports W&LE's attempts to preserve its
essential services and its position as
a competitive ratemaker. (3) On behalf of any other ISRI members that may be
similarly affected, ISRI
asks that we impose conditions, as requested by W&LE, that will protect
ISRI's members from the
anticompetitive effects of the CSX/NS/CR transaction in the areas served by
W&LE.

NATIONAL GRAIN AND FEED ASSOCIATION. NGFA(409) believes that the CSX/NS/CR
transaction will improve market access and service, but also believes that
implementation of the
transaction must be monitored to assure quality service and effective
competition. NGFA therefore asks
that we appoint a Conrail Acquisition Advisory Council to develop standards and
performance
measurements, as well as specific reporting measures, that will provide an
accurate portrayal of
implementation by CSX and NS. NGFA recommends: that the advisory council
consist of a broad
representation of rail users that ship or receive freight on CSX and/or NS, as
well as senior executives of
CSX and NS; that the advisory council develop, within the private sector,
mechanisms to prevent, or to
identify and address, obstacles to effective and efficient implementation; that
the advisory council be
subject to federal laws that would require its meetings to be publicly
announced and open; and that the
advisory council's reports and findings submitted to the Board be broadly and
publicly disseminated.
NGFA adds that, if such a council cannot be formed, we should accomplish the
same oversight process
by expressly committing to provide an open public forum in which
representatives of CSX and NS, and
of the industries they serve, would provide regularly scheduled updates on
post-transaction performance.

NATIONAL MINING ASSOCIATION. NMA(410) contends that the increased traffic, and
particularly the increased intermodal traffic, that CSX and NS intend to haul
post-transaction raises
serious questions about the ability of CSX and NS to provide, post-transaction,
effective and efficient
service in the transportation of mineral products traffic, particularly coal
traffic. Service disruptions,
NMA warns, are likely to occur, if either CSX or NS has not developed,
prior to implementation of the
CSX/NS/CR transaction, a unified operational structure. Service disruptions,
NMA adds, are also likely
to occur if either CSX or NS attempts to implement the transaction
notwithstanding a lack of sufficient
operating personnel; and NMA particularly fears that reductions of the work
force engaged in train
operations could cause severe service disruptions if such reductions occur
before the newly expanded
CSX and NS systems have been rationalized from a systems management
perspective. NMA therefore
asks: (1) that, prior to approving the CSX/NS/CR transaction, we require
applicants to prepare and file a
detailed initial plan of operations focused on actions necessary to avert
service disruptions and to assure
the continuation, at not less than prevailing service levels, of the railroad
transportation services provided
coal producers, consumers, and/or shippers by Conrail; (2) that we provide for
a comment period of not
less than 120 days for the public to respond to the detailed initial plan of
operations; (3) that we consider
the comments, and, in light of the comments, order appropriate revisions to the
plan of operations; and
(4) that we require applicants' adherence to the approved plan of
operations as a condition for approval of
the CSX/NS/CR transaction.

APPENDIX F: COAL SHIPPERS

A. T. MASSEY COAL COMPANY. Massey produces, processes,
and sells bituminous, low
sulfur coal of steam and metallurgical grades from 19 mining complexes (17 of
which include
preparation plants) located in Kentucky, West Virginia, Virginia, and
Tennessee.(411) Massey, which has
only "very limited" operations served by Conrail, ATMC-3 at 4, indicates that
its coal is originated
primarily by CSX and NS (indeed, Massey claims to be the second largest coal
shipper on both CSX and
NS). Massey adds that it is "in favor of the proposed transaction, since it
will produce more single-line
service than has ever existed for the movement of Massey's coal." ATMC-2
at 3.

Massey's chief concern respecting the CSX/NS/CR transaction involves the
impact the
transaction may have upon Massey's relative competitive position
vis-à-vis its 1-to-2 rivals. Massey
indicates: that each of its facilities is served by a single railroad
pre-transaction and will be served by a
single railroad post-transaction;(412) that,
accordingly, there is no reason to believe that the rail rates
charged Massey will experience post-transaction decreases; that each of the MGA
facilities of many of
Massey's direct competitors is served by a single railroad pre-transaction but
will be served by two
railroads post-transaction;(413) that,
accordingly, there is reason to believe that the rail rates charged
Massey's MGA competitors will experience post-transaction decreases; and that,
therefore, there is
reason to fear that the CSX/NS/CR transaction may significantly degrade
Massey's competitive position
vis-à-vis its 1-to-2 MGA competitors.

Massey concedes that, given the many origin points for its coal traffic, it
cannot determine with
any degree of specificity how the CSX/NS/CR transaction will affect its ability
to compete with other
producers, particularly those located on Conrail's MGA lines. Massey insists,
however, that, if
competition drives down the net freight costs of Massey's MGA competitors,
Massey's relative position
could be substantially harmed, although Massey adds that, because much of its
coal production is tied up
in long-term contracts (with the purchasers of its coal), the full impact of
the CSX/NS/CR transaction
will not become apparent for quite some time.(414)

Massey therefore asks that we impose upon the CSX/NS/CR transaction
conditions that embody
four principles. (1) Massey contends that, in view of the problems that could
develop with the division
of Conrail, we should conduct oversight proceedings following consummation.
(2) Massey contends that
oversight proceedings should be conducted over a 10-year period, no less often
than annually for the first
4 years and thereafter at such intervals as experience warrants. (3) Massey
contends that, because of the
long tail of events that will occur following consummation, we should reserve
continuing jurisdiction to
impose such conditions as are needed to correct problems as and if they occur.
(4) Massey contends that,
should it become apparent post-transaction that Massey's competitive position
has suffered vis-à-vis its
1-to-2 competitors, Massey should be allowed to seek, in the oversight
proceedings, the imposition of
competitive access or other conditions to remedy the harm to Massey's relative
competitive position.(415)

AMERICAN ELECTRIC POWER SERVICE CORPORATION. AEP's
Cardinal Plant, a
coal-fired electric generating station located on the Ohio River in Brilliant,
OH, is served by a single line
of track but can receive coal delivered by two railroads:(416) W&LE (which owns that single line of
track)
and Conrail (which has local trackage rights over approximately 3.5 miles of
that single line of track,
between a Conrail/W&LE junction at Shannon Run, OH, and the Cardinal
Plant at Brilliant, OH).(417)
AEP concedes that the CSX/NS/CR transaction would not appear to have a
competitive impact:
post-transaction, the Cardinal Plant will still be served by a single line of
track and will still have access
to two railroads (W&LE, which will own the single line of track, and NS,
which will acquire Conrail's
trackage rights over that line, and which will also acquire all of the Conrail
tracks in eastern Ohio that are
in the general vicinity of the Cardinal Plant).(418) AEP is concerned, however, that, if the
CSX/NS/CR
transaction sets in motion forces that result in the eventual collapse of
W&LE, the Cardinal Plant will
lose one of its two railroads.(419)

AEP therefore asks that we impose a condition to take effect if and when
W&LE is unable to
perform its obligations to serve the Cardinal Plant. This condition: (1)
would require CSX to assume
W&LE's rights and obligations vis-à-vis AEP; (2) would require CSX
to submit to the Board a specific
proposal for carrying out those obligations forthwith; and (3) if CSX's coal
trains cannot operate on
W&LE's Benwood-Cardinal Plant line for the entire distance between Benwood
and the Cardinal Plant,
would require NS to permit CSX to access the Cardinal Plant via trackage rights
over the parallel Conrail
line, under the terms and conditions provided for in the current
W&LE/Conrail agreement.

CENTERIOR ENERGY CORPORATION. Centerior,(420) an electric utility serving customers
in Northern Ohio, operates five coal-fired generating stations in Ohio:
Eastlake Station in Eastlake, OH;
Lake Shore Station in Cleveland, OH; Ashtabula Station (with two units,
Ashtabula 5 and Ashtabula C)
in Ashtabula, OH; Avon Lake Station in Avon Lake, OH; and
Bayshore Station in Oregon, OH.
Pre-transaction, Eastlake and Lake Shore Stations and the Ashtabula 5 unit at
Ashtabula Station are
served exclusively by Conrail; post-transaction, Eastlake and Lake Shore
Stations and the Ashtabula 5
unit at Ashtabula Station will be served exclusively by CSX. Pre-transaction,
the Ashtabula C unit at
Ashtabula Station has no rail access but receives limited quantities of coal
via truck; post-transaction, the
Ashtabula C unit at Ashtabula Station will still lack rail access and will
apparently still receive limited
quantities of coal via truck. Pre-transaction, Avon Lake and Bayshore Stations
are served exclusively by
NS; post-transaction, Avon Lake and Bayshore Stations will continue to be
served exclusively by NS.

(1) Centerior claims that the CSX/NS/CR transaction will eliminate
Centerior's currently-available single-line haul from Southeastern Ohio coal
origins to Eastlake, Lake Shore, and Ashtabula
Stations. Pre-transaction, much of the coal burned at Eastlake and Lake Shore
Stations and at the
Ashtabula 5 unit at Ashtabula Station has come from The Ohio Valley Coal
Company's Powhatan No. 6
Mine (this coal is referred to as East Ohio coal) and the Cyprus Amax Minerals
Company's Emerald
Mine in the Pittsburgh No. 8 Seam (this coal is referred to as MGA coal).
Pre-transaction, East Ohio
coal (from the Powhatan No. 6 mine and other sources) and MGA coal (from the
Emerald Mine and
other sources) has been transported by Conrail in a single-line haul;
post-transaction, however, a single-line haul will not be possible, because the
destinations will be served by CSX but the origins will be
served by NS. Joint-line service, Centerior insists, is necessarily less
efficient: delays are inherent, and
transit times are necessarily increased. Another concern, Centerior adds, is
that CSX will be able to
control the pricing on any joint-line movement from Ohio origins, so as to
assure that Centerior will
select coal sources served by CSX (which will provide CSX with a longer haul).

(2) Centerior claims that the CSX/NS/CR transaction, by affording certain
Conrail-served
utilities access to dual-carrier service from origin to destination, will harm
Centerior by enhancing the
competitive position of its utility rivals. Centerior contends that, because
it competes with these utilities
for off-system sales, and because these utilities will be able to generate
electricity in a less costly manner
(due to new or improved dual rail access), Centerior's ability to make
off-system sales will be
prejudiced.(421)

(3) Centerior fears that the CSX/NS/CR transaction will expose Centerior to
pass-through of a
portion of the acquisition premium that CSX and NS have paid to acquire
Conrail. Centerior concedes,
in essence: that Conrail and NS presently seek to maximize their earnings on
Centerior's coal traffic; and
that each of Centerior's five stations is exclusively served today (either by
Conrail or by NS). Centerior
claims, however, that, because of the acquisition premium, the pressure CSX and
NS will be under to
maximize their earnings post-transaction will be greater than the pressure
Conrail and NS presently are
under to maximize their earnings pre-transaction. Centerior contends that,
even if actual earnings by
CSX and NS from intermodal diversions, etc., do not fall so far short of their
projections as to prompt
direct rate increases, upward pressure on coal and other bulk commodity rates
is threatened by: (1) a
dampening of any competitive ardor on the part of CSX and NS as each
concentrates on maximizing
revenues from its post-transaction traffic base; and (2) higher reported unit
costs due to acquisition
premium amortization, which in turn would raise the variable cost threshold for
the Board's rate
reasonableness jurisdiction. Centerior fears that the impact of the
acquisition premium on exclusively
served shippers like Centerior will be extreme: by Centerior's calculations,
the acquisition premium will
increase the rate reasonableness jurisdictional threshold by 15% for CSX and by
24% for NS. Centerior
also fears that the acquisition premium will reduce the return-on-investment
calculation for both CSX
and NS.

Basic Conditions Requested. Centerior therefore asks that we
condition any approval of the
primary application: (1) by granting NS trackage rights over the Conrail line
between the Lake Shore
Station located in Cleveland and CP 124 located east of Ashtabula,
including rights to enter that line
through the Buffalo Connecting Track and the Cleveland Connecting Track, for
the limited purpose of
transporting loaded and empty trains of coal to and from Centerior's Eastlake,
Lake Shore, and Ashtabula
Stations; and (2) by requiring (i) that the acquisition premium be quantified,
and (ii) that the quantified
amount be excluded from applicants' net investment bases for regulatory costing
purposes.

Alternative Conditions Requested. Centerior contends on brief
that, if we do not impose its basic
trackage rights condition, we should at least require that NS be granted
terminal trackage rights under 49
U.S.C. 11102(a): (i) between Collinwood Yard and Eastlake Station; (ii)
between Collinwood Yard and
Lake Shore Station; and (iii) between Ashtabula and Ashtabula Station.
See CEC-17 at 31-35. Centerior
also contends on brief that, if we do not impose its basic/alternative trackage
rights condition, we should
at the very least require applicants to enter an agreement: (a) which will be
enforceable by the Board; (b)
which will obligate applicants to offer rates and service commitments to
Centerior (from all Southeastern
Ohio origins from which Centerior's three Cleveland-area plants formerly could
receive coal via single-line Conrail service) that will be the same as the
rates and service commitments in Centerior's current
contract(s) with Conrail which were effective on January 1, 1997; (c) which
will preclude the disclosure
of Centerior's confidential rail rate information to any third party; and
(d) which will obligate applicants
to offer such rates and services for a minimum period of 10 years from the
separation date (as defined in
paragraph 2 of the Ohio Valley agreement, which is discussed below).
See CEC-17 at 23-24 and 36-37.

Ohio Valley Coal Company Agreement; Additional Condition
Requested. Centerior claims that a
settlement agreement entered into by applicants and The Ohio Valley Coal
Company (hereinafter
referred to as the Ohio Valley agreement): (a) does not provide a remedy for
the harms Centerior will
suffer if the CSX/NS/CR transaction is approved and implemented; and (b) will,
if allowed to take effect,
cause Centerior (and Ohio Valley's competitors as well) to suffer additional
harms. Centerior contends
that the Ohio Valley agreement is flawed in three significant respects.(422)

(1) Paragraph 5 of the Ohio Valley agreement requires applicants: to
certify to Ohio Valley the
applicable transportation rates from Ohio Valley's Powhatan No. 6 mine and
other Ohio Valley sources
in the near vicinity thereof to Centerior's Eastlake and Ashtabula Stations;
and to expressly state such
certification requirement in any applicable contract with Centerior. Centerior
contends that paragraph 5
is blatantly anticompetitive because Ohio Valley, in responding to Centerior's
coal supply bids, could use
the certified information to the detriment of both Centerior and competing coal
mines.

(2) Paragraph 1 of the Ohio Valley agreement provides: that applicants
will seek to negotiate
contract freight rates with Centerior for coal from Powhatan No. 6 mine and
nearby affiliated mines; and
that such rates will be the same as the rates set forth in Centerior's
contract(s) with Conrail which were in
effect on January 1, 1997. Centerior notes, however, that there is no
guarantee that these rates will ever
be available from Ohio Valley origins because other provisions of the Ohio
Valley agreement provide:
that applicants will work with Ohio Valley to find other purchasers for its
coal; and that, if during any
period applicants ship at least 1.2 million tons of coal per year from Ohio
Valley origins to destinations
other than Centerior, the Ohio Valley agreement shall not apply for and during
such period.

(3) Paragraph 2 of the Ohio Valley agreement provides that the term of that
agreement will
extend through December 31, 2004, with a possible extension for an additional
year. Centerior claims,
however, that the Ohio Valley "solution" to Centerior's single-line problem:
is, at best, a short fix; and
is, at worst, completely illusory, because, as previously noted, the obligation
to quote 1997 rates can be
extinguished if Ohio Valley finds other purchasers for its coal.

Centerior insists that, regardless of whether we impose its basic (and
presumably also its
alternative) conditions, we should condition approval of the CSX/NS/CR
transaction on the rejection,
nullification, and/or termination of the offending provisions of the Ohio
Valley agreement.(423)

CONSUMERS ENERGY COMPANY. Consumers, an electric and gas
utility serving
Michigan's Lower Peninsula, operates five coal-fired generating plants that
provide over 77% of its
baseload system capacity: the J.H. Campbell Station near West Olive, MI;
the D.E. Karn and
J.C. Weadock Stations near Essexville, MI; the B.C. Cobb Station at
Muskegon, MI; and the J.R.
Whiting Station near Toledo, OH.(424)
Consumers concedes that its pre-transaction transportation options
are constrained, both at origin (many of Consumers' eastern sources are served
exclusively by rail and
exclusively by CSX) and, at least as respects Campbell, at destination.
Campbell, a baseload plant
responsible for about half of Consumers' coal-fired generation, is served
exclusively by rail and
exclusively by CSX (and therefore can receive eastern coal only via a CSX
single-line haul); Karn and
Weadock are served by CSX and CMGN (and therefore can receive eastern coal via
a CSX single-line
haul and also via a Conrail-CN-CMGN joint-line haul) and are also served by
lake vessel;(425) Cobb, which
has no rail access, is served exclusively by lake vessel (and therefore can
receive eastern coal originated
by a railroad other than CSX); and Whiting is served by CSX and CN (and
therefore can receive eastern
coal via a CSX single-line haul and also via a Conrail-CN joint-line haul).
Consumers, though
conceding the existence of potential rail competitive options as respects
eastern coal moving to Karn,
Weadock, Cobb, and Whiting, insists that CSX's dominance at Campbell has
tempered the impact of the
options at the other stations.(426)

Consumers acknowledges that, whereas its pre-transaction access to
Conrail's MGA coal mines
is generally limited to a Conrail-CSX joint-line haul, its post-transaction
access to Conrail's MGA coal
mines will entail a CSX single-line haul.(427) Consumers claims, however, that this CSX
single-line haul
(not to mention dual access by CSX and NS to Conrail's MGA coal mines) will be
of little or no value.
The notion that Consumers will benefit from this new CSX single-line access,
Consumers contends, is
premised upon the erroneous view that the only thing that prevents Consumers
from greater use of MGA
coal today is the necessity for a Conrail-CSX joint-line haul. The fact of the
matter, Consumers insists,
is that, given the limitations of its equipment, environmental considerations
have generally precluded
Consumers, and generally will continue to preclude Consumers, from burning
substantial amounts of
relatively high sulfur MGA coal. Improved CSX access to MGA coal mines,
Consumers therefore
contends, will not confer any competitive benefits on Consumers.

Consumers fears, in fact, that the CSX/NS/CR transaction will actually
result in a reduction of
competition for the delivery into Michigan of the eastern low sulfur and
compliance coals that meet
Consumers' requirements. Consumers claims that, because most of the eastern
low sulfur and compliance coal sources on which Consumers relies are already
located on CSX, the CSX/NS/CR transaction,
which will further concentrate CSX's dominance over these coal sources, will
lessen what little
competition exists today. Consumers also fears that, for captive shippers like
itself, the CSX/NS/CR
transaction presents a serious risk of significant harm from future increases
in rail rates, as applicants
move to recover the multi-billion dollar price premium they paid for Conrail.

Consumers accordingly asks that we deny the primary application, or,
alternatively, that we
subject any approval thereof to two conditions. (1) Condition #1, which is
premised upon the notion that
the most effective means to protect Consumers from rail market power abuse
vis-à-vis future rates to
Campbell is to open Campbell to effective rail competition, would require CSX
to grant trackage rights
or haulage rights, on reasonable terms, over the CSX line that runs between
Campbell Station near West
Olive, MI, and the CSX/Conrail interchange at Grand Rapids, MI.(428) (2) Condition #2, which is
premised upon the notion that an investment base calculated by reference to
acquisition price is
inappropriate for regulatory costing purposes, would require CSX and NS to
exclude the acquisition
premium from their net investment bases for such purposes. The purchase price
of new or additional
assets, Consumers contends, is not the proper measure of a utility's increased
investment base; to protect
captive shippers from being forced to subsidize the bidding war waged by CSX
and NS, only the book
value of Conrail's assets (and not the acquisition premium) should be included
in CSX's and NS'
investment bases for regulatory costing purposes.(429)

EASTMAN KODAK COMPANY. Kodak relies on rail service for
the inbound transportation
of coal and other materials used in, or in connection with, the manufacturing
operations it conducts at its
Kodak Park facility in Rochester, NY. Post-transaction, Kodak notes, both CSX
and NS will be able to
provide competitive rates, routes, and service on traffic moving to Kodak Park,
including coal
movements originating on Conrail's MGA lines. CSX, which will acquire
Conrail's Buffalo-Rochester-Albany line, will access Kodak Park directly; and
NS, which will acquire Conrail's Buffalo-Silver Springs-Corning line, will
access Kodak Park via a shortline connection (R&S, the shortline,
connects with Conrail's Buffalo-Silver Springs-Corning line at Silver
Springs). Kodak is concerned,
however, that, because it is a party to one of Conrail's Existing
Transportation Contracts, the new
competition made possible by the CSX/NS/CR transaction will not benefit Kodak
(not, at least, as
respects the coal traffic subject to the Conrail/Kodak contract) until the
Conrail/Kodak contract's
expiration date (December 31, 2001). Kodak fears that CSX, which will succeed
to Conrail's rights with
respect to the Conrail/Kodak contract, intends to monopolize Kodak's business
into the next century (i.e.,
until December 31, 2001).(430)

Kodak claims, in essence, that the position CSX has taken vis-à-vis
the Conrail/Kodak contract is
unfair, in that CSX is insisting on adherence to those provisions of the
contract that favor CSX but is
asking the Board to override those provisions of the contract that favor
Kodak. (1) The contract
apparently contains provisions that require Kodak to accept delivery, at
specified rates, of substantial
volumes of coal. CSX is insisting on adherence to these provisions (i.e., CSX
is insisting that, until the
contract's expiration date, coal traffic that would have moved under the
contract had there been no
CSX/NS/CR transaction must move under the contract notwithstanding the
CSX/NS/CR transaction).
(2) The contract also contains provisions that bar assignment of the contract,
in whole or in part, by
Conrail without the prior written consent of Kodak. CSX is not insisting on
adherence to these
provisions; CSX, rather, is asking for an override of these provisions.

Kodak contends: that we have no authority to nullify the provisions of the
Conrail/Kodak
contract that bar assignment without consent; and that, even if we do have such
authority, we should not
utilize that authority to facilitate the efforts of CSX and NS to carve up and
allocate markets without a
competitive alternative in a most egregious anticompetitive fashion. And,
Kodak adds, nullification of
the "consent to assignment" provisions is not "necessary" to implementation of
the CSX/NS/CR
transaction. Kodak therefore asks that we take no action that might impair the
contractual rights of
Kodak and other shippers that have entered into "Existing Transportation
Contracts" with Conrail.

EIGHTY-FOUR MINING COMPANY. EFMC, a Rochester &
Pittsburgh Coal Company
subsidiary, owns and operates a coal mine known as Mine 84 in Washington
County, PA. Mine 84
produces a high Btu content and medium sulphur content Pittsburgh Seam coal
that competes with coal
produced at six other rail-served Pittsburgh Seam mines (the Bailey,
Enlow Fork, Blacksville, Loveridge,
Emerald, and Federal #2 mines, referred to collectively as the six
competitive mines).(431) EFMC warns
that the CSX/NS/CR transaction will effect a drastic change in the competitive
posture of Mine 84 vis-à-vis the six competitive mines.
Pre-transaction, Mine 84 is served exclusively by rail and exclusively by
Conrail; post-transaction, Mine 84 will be served exclusively by rail and
exclusively by NS.(432)
Pre-transaction, the six competitive mines are served exclusively by rail and
exclusively by Conrail;
post-transaction, however, these mines, though still served exclusively by
rail, will be served by two
railroads (CSX and NS).(433) The CSX/NS/CR
transaction, EFMC therefore claims, will harm EFMC in
three distinct ways: (1) by conferring upon the six competitive mines, and
upon any new mines
accessible from the MGA lines, an advantage (dual carrier access) not conferred
upon Mine 84; (2) by
effectively foreclosing Mine 84 from access to any destination served
exclusively by Conrail
pre-transaction and by CSX post-transaction; and (3) by imposing upon Mine
84 a severe disadvantage in
competing to supply coal to destinations jointly served by CSX and NS. And,
EFMC insists, the new
single-line access it will have to southeastern utility customers served by NS
will not compensate for the
foreclosure and disadvantage EFMC will suffer with regard to approximately half
of its market.(434)

EFMC therefore asks that we preserve the pre-transaction competitive
balance within the MGA
coal market by imposing a condition granting CSX access to Mine 84. (1) EFMC's
preferred condition
would require that CSX be granted trackage rights over the Ellsworth Secondary
with the right to serve
Mine 84, and with associated rights of access along the Mon Branch. These
trackage rights, EFMC adds,
should be subject to terms and conditions consistent with those governing CSX's
access to Conrail's
MGA lines. (2) EFMC's alternative condition would require that CSX be
allowed to access Mine 84 via
switching provided by NS, with cars interchanged either at Homestead (at the
north end of the
Mon Branch) or at West Brownsville (the junction point between CSX and the
MGA lines). EFMC
adds: that, if CSX and NS cannot agree on an interchange point, that point
would have to be determined
by the Board; and that the switching to be performed by NS should be subject to
the same terms and
conditions that will be applicable to the reciprocal switching already provided
for in the CSX/NS/CR
application.

GPU GENERATION. GPU indicates that its interests in this
proceeding are primarily focused
on two coal-burning units: Portland Station (which is located 10 miles from
Stroudsburg, along the west
bank of the Delaware River in Northampton County, PA); and Titus Station (which
is located two miles
south of Reading, along the Schuylkill River in Berks County, PA). GPU also
indicates: that Portland
and Titus Stations are rail-served exclusively by Conrail pre-transaction and
will be rail-served
exclusively by NS post-transaction; that, in 1994, GPU entered into a coal
transportation agreement with
Conrail to provide the coal transportation requirements of Portland and Titus
Stations from specified
MGA coal mines; and that the Conrail/GPU contract expires on December 31,
1998. GPU further
indicates: that it has entered into a number of long-term contracts with
mining companies for the supply
of coal for consumption by its various generating stations; that these
contracts, which expire at various
dates through 2007, provide for the purchase of either a fixed or a
minimum/maximum amount of its
stations' coal needs; that the coal burned at Portland and Titus Stations is
presently sourced from
Consol's Pittsburgh Seam mines; and that GPU recently entered into a new coal
supply contract (that
continues until December 31, 2002) respecting coal originated at Rochester
& Pittsburgh Coal
Company's Mine 84.

GPU's grievance respecting the CSX/NS/CR transaction concerns the
"exorbitant" acquisition
premium that applicants agreed to pay for Conrail.(435) GPU notes that, if the CSX/NS/CR
transaction is
approved, the pending expiration of the Conrail/GPU contract will require GPU
to negotiate with NS
over post-1998 rail service to Portland and Titus Stations. GPU contends that
it will be captive to NS
post-transaction (because NS' post-transaction control over the lines into
Portland and Titus Stations will
negate the effect of CSX's post-transaction access to the MGA coal fields), but
concedes, in essence, that
it will be no more captive to NS post-transaction than it has been to Conrail
pre-transaction. GPU insists,
however, that, because of the acquisition premium, the revenue maximization
pressures upon NS will be
far greater than the revenue maximization pressures upon Conrail.

GPU asks that the CSX/NS/CR application be denied. The CSX/NS/CR
transaction, GPU
contends, will harm the public interest because the acquisition premium paid by
applicants will burden
CSX and NS with substantial fixed charges, which CSX and NS will attempt to
finance by imposing
unreasonable rate increases on their captive shippers. CSX and NS, GPU claims,
will have difficulty
recovering those charges in any other fashion; the cost savings and intermodal
traffic diversions CSX
and NS have projected, GPU further claims, simply will not generate the
required amount of revenues.
Captive shippers, GPU contends, should not be required to bear the risk that
applicants paid too much for
Conrail.

GPU insists that, if we approve the CSX/NS/CR application, we must impose
an acquisition
premium exclusion condition designed to protect GPU and other captive shippers
from being forced to
subsidize the acquisition premium through higher rail rates. The condition
contemplated by GPU:
would require the Board to quantify the amount of the acquisition premium; and
would require
applicants to exclude the quantified amount from their net investment bases for
regulatory costing
purposes. Citing what it calls "[l]ong-standing precedent in the area of
utility maximum rate regulation
[that] holds that acquisition-related asset write-ups are not properly
includable in a utility's investment
base," GPU-03, Argument at 7-8, GPU contends that, for regulatory costing
purposes, only the uninflated
(by the premium) net book value of Conrail's assets should be allocated to
CSX's and NS' investment
bases.

INDIANAPOLIS POWER & LIGHT COMPANY. IP&L, an
electric utility, has two coal-fired generating stations in Indianapolis. (1)
IP&L's Perry K plant is located on a Conrail line. IP&L
contends that, because Conrail does not serve IP&L's downstate Indiana
origin mines, Conrail functions
today as a switch carrier, and is neutral as between traffic originated by
Indiana Southern Railroad
(ISRR) and Indiana Rail Road Company (INRD, an 89%-owned CSX subsidiary). (2)
IP&L's Stout plant
is located on an INRD line. IP&L contends that coal originated at
IP&L's downstate Indiana origin
mines can today be delivered to Stout both by ISRR (via switches by Conrail and
INRD) and by INRD.

IP&L fears that the CSX/NS/CR transaction will have 2-to-1 impacts at
both plants. (1) Perry K,
IP&L contends: can today be served by two railroads (ISRR and INRD, both
of which have access via a
Conrail switch); post-transaction, however, CSX, to which the Conrail line will
be assigned, will favor
INRD; and, therefore, Perry K's post-transaction service will be provided by
CSX/INRD. IP&L also
contends: that Perry K presently has access to direct service by Conrail and
to indirect service by INRD
(via a short truck haul from Stout); that, once the CSX/NS/CR transaction is
implemented, CSX will not
compete with INRD; and that, therefore, Perry K's post-transaction coal will be
hauled by CSX/INRD
only. (2) Stout, IP&L contends: can today be served by two railroads
(ISRR, apparently via switches by
Conrail and INRD; and INRD); post-transaction, however, INRD will favor CSX;
and, therefore, Stout's
post-transaction service will be provided by CSX/INRD only. IP&L adds
that, in any event, it presently
has the ability to "build out" from Stout to reach a nearby Conrail line,
formerly the Indianapolis Belt
Secondary Route (the Indianapolis Belt); but this build-out option, IP&L
warns, will cease once the
Indianapolis Belt is assigned to CSX, because NS will have only overhead
trackage rights on that line.
IP&L also adds that it would presently be possible to establish a truck
transloading facility on the
Indianapolis Belt, and to serve Stout from that facility; and IP&L warns
that this transload option, much
like the build-out option, will cease once the Indianapolis Belt is assigned to
CSX. IP&L therefore
contends that the CSX/NS/CR transaction should not be approved unless we adopt
certain conditions.(436)

Condition #1. IP&L asks that we impose a condition making NS
an equal competitor with
CSX/INRD. This, IP&L adds, could be most effectively accomplished by
making Indianapolis an SAA.
IP&L claims that an SAA approach: would give NS an ownership interest in
Conrail's Indianapolis lines,
and also in Conrail's Avon and Hawthorne Yards; would allow NS to connect with
shortlines operating in
and around Indianapolis; would allow NS to provide direct service to points
that can presently receive
direct service from Conrail; and would allow NS to serve Stout via a build-out
or build-in to/from the
Indianapolis Belt.(437)

Condition #1a. IP&L contends that, because Conrail can today
serve Stout via switching over
INRD, we should impose a condition granting NS the right to serve Stout via
switching over INRD, at a
reasonable switching charge and without the inefficiencies of moving traffic
via Hawthorne Yard.

Condition #2. IP&L asks that we impose a condition preserving
the build-in/build-out status quo
at Stout. Conrail, IP&L claims, would be able to serve a build-out
constructed between Stout and the
Indianapolis Belt; and NS, IP&L therefore insists, should also be able to
serve any such build-out.(438)

Condition #3. IP&L asks that we require direct access by NS
(via fully effective local trackage
rights) to shippers in Indianapolis (especially IP&L at its Perry K
and Stout plants) and to shortlines
serving Indianapolis. IP&L notes that, with direct access: the
inefficient routing of NS traffic through
Hawthorne Yard would be unnecessary; and NS would be able to provide local
service, service via build-ins and build-outs, and service to new facilities.(439)

Condition #4. IP&L asks that we impose a condition requiring
that the Perry K and Stout plants
be treated as 2-to-1 destinations.(440)

Condition #5. IP&L contends that there is no reason why NS
should be charged, with respect to
any particular movement, both a trackage rights fee and a switching charge.
IP&L insists that, although
one or the other would be appropriate, the imposition, with respect to any
particular movement, of both
would not be appropriate, and would leave NS unable to provide competitive
service to Indianapolis
shippers. IP&L therefore asks that we require that NS pay CSX:
(1) either (i) a trackage rights fee set at
CSX's costs, or (ii) a switching charge set at CSX's or INRD's costs (depending
on which carrier delivers
the traffic); but (2) not both a trackage rights fee and a switching charge.
Condition #5 would also
require that such costs be billed to shippers on a "direct passthrough"
basis.(441)

Condition #6. IP&L asks that we impose a condition that
provides that traffic in Indianapolis
handled by NS, especially IP&L's unit trains of coal, need not be routed by
NS via Hawthorne Yard, but
instead may be delivered or picked up by NS directly to/from shippers. There
is, IP&L claims, no
justification for denying NS local trackage rights and instead requiring it to
route all traffic via
Hawthorne Yard.

Condition #7. To ensure that any switching upon which NS must
rely is efficient and
nondiscriminatory, IP&L asks that we impose a condition providing for
oversight of any CSX switching
services.

Condition #8. IP&L asks that we impose, with respect to the
cost-based trackage rights fees and
switching charges provided for by Condition #5, a supplemental condition
providing: (1) that the Board
will have the right to audit CSX's relevant costs; (2) that shippers, including
IP&L, will have the right to
audit CSX's relevant costs; (3) that shippers may challenge such costs as
excessive or unreasonable; (4)
that the Board will review any such challenge on an expedited basis; and (5)
that the Board will have the
authority to prescribe lower, reasonable fees and/or charges, if appropriate.

Condition #9. Because (IP&L claims) applicants have not
determined precisely how NS will
operate in Indianapolis, IP&L asks that we impose a condition that provides
that the CSX/NS/CR
transaction cannot take effect until all necessary labor agreements and
detailed operations plans are in
place.

Condition #10. IP&L contends: that, after its current
contracts with INRD expire in 2002,
environmental considerations may require the use of low-sulfur "compliance"
coal at Stout; that the low-sulfur coal needed at Stout will probably have to
come from western origins; that the competitive routing
options for western coal that exist today (Conrail via St. Louis; CSX via
Chicago) will cease to exist
post-transaction (because the Conrail route will be acquired by CSX); that a
post-transaction NS routing
would not be a viable option, because NS' routings via St. Louis and Chicago
will be circuitous and
inefficient, and because there will be serious impediments to an NS routing via
Kansas City; and that,
accordingly, IP&L's only post-transaction western coal routing option will
be via CSX which, by
favoring its own low-sulfur coal origins, might actually prevent IP&L from
using any western coal, even
though coal originated at CSX origins might not produce the best outcome for
IP&L's ratepayers or the
environment. To ensure that balanced competition for movements of western coal
to Indianapolis is
maintained, and to ensure that any IP&L traffic routed via Kansas City or
other interchanges to NS from
western carriers will be handled efficiently with through rates quoted through
Kansas City, IP&L asks
that we impose a condition requiring, for an indefinite period, continuing
expeditious oversight of this
matter.

Condition #11. To ensure that NS will be able to compete
effectively with CSX for western coal
movements to Indianapolis, IP&L asks that we impose a supplemental
condition providing either: (1)
that the western railroads (UPRR and BNSF) must, upon request by IP&L or
NS, participate in a through
rate with NS at Kansas City on a nondiscriminatory basis vis-à-vis
St. Louis and Chicago; or (2) that
CSX must, upon request by IP&L or NS, give NS access on a nondiscriminating
basis over one of CSX's
lines from St. Louis or Chicago to Indianapolis.

Condition #12. IP&L claims that its evidence: demonstrates
that the railroads involved in the
CSX/NS/CR transaction are not now pricing their "bottleneck" services in the
profit maximizing mode
contemplated by the "one-lump" theory; demonstrates, that is to say, that a
coal-burning plant served by
a single (bottleneck) railroad at destination may benefit from rail competition
at origin, provided that the
destination railroad is not one of the origin railroads; and demonstrates, by
necessary implication, that
the one-lump notion that a captive coal-burning utility cannot be adversely
impacted by a transaction
such as the CSX/NS/CR transaction is not necessarily valid. IP&L insists
that its evidence demonstrates
that, given the rigorous nature of the assumptions that underlie the one-lump
theory, such assumptions
are not likely to be met in practice with sufficient uniformity to justify a
presumption that the theory
applies to every transaction. IP&L further insists that its evidence
demonstrates that, in reality, the profit
maximizing pricing pattern contemplated by the one-lump theory has not been
followed consistently by
the railroads involved in the CSX/NS/CR transaction. IP&L therefore
concludes that its evidence
demonstrates that the CSX/NS/CR transaction will increase the market power of
CSX and NS vis-à-vis
captive coal-burning utilities, and will thereby enable CSX and NS to extract
increased monopoly profits
from such utilities.

IP&L contends that, to ensure that the CSX/NS/CR transaction does not
result in an increase in
the market power exercised by applicants, we must impose an appropriate
condition: to protect any coal
shipper presently served by a single bottleneck railroad at destination,
provided that the bottleneck
railroad is not also one of the origin railroads; and also to protect any coal
shipper whose rail competition
at destination will be reduced or eliminated by the CSX/NS/CR transaction. The
appropriate condition
that we must impose, IP&L contends, would be either an "equal access"
condition (IP&L's first choice),
a "bottleneck rate jurisdiction" condition (IP&L's second choice), or a
"rate cap" condition (IP&L's third
choice).(442) (1) The equal access condition
would provide IP&L, and any other similarly situated coal
shipper, effective equal access to CSX and NS at destination for the receipt of
coal. (2) The bottleneck
rate jurisdiction condition would require CSX and NS to accept rate
jurisdiction over the bottleneck
segment of any movement of coal to IP&L and any other similarly situated
coal shipper. (3) The rate cap
condition would impose a rate cap (with adjustments for cost changes using the
RCAF-A) for at least 5
years, subject to extension if circumstances warrant.

Condition #13. IP&L asks that we impose a condition barring
CSX and NS from including the
acquisition premium in the determination of the jurisdictional threshold under
49 U.S.C.
10707(d)(1)(A).(443) IP&L contends that,
without this condition: the acquisition premium, the associated
asset write-up, and the increased depreciation expense resulting from the
write-up will generate a
substantial increase in CSX's and NS' variable costs; and any increase in such
variable costs will
effectively raise the R/VC 180% rate floor for captive traffic.(444) IP&L further contends: that, as a
practical matter, the R/VC 180% ratio is, for captive traffic, the rate ceiling
as well as the rate floor; and
that, for this reason, if we were to allow any part of the acquisition premium
and the associated write-up
of Conrail's assets to affect the calculation of variable costs for purposes of
determining the jurisdictional
threshold, we would be permitting CSX and NS to raise their rates and those of
Conrail's customers
above the previous "reasonable maximum."(445)

Condition #14. IP&L asks that we impose a condition barring
CSX and NS from including the
acquisition premium in the determination of revenue adequacy under 49 U.S.C.
10704(a).(446) This
condition, IP&L claims, is critical because, without it, the acquisition
premium CSX and NS have paid
will result in inflated valuations, which themselves will result in inflated
return targets for revenue
adequacy calculations. IP&L adds that the decision holding that revenue
adequacy calculations are to be
based upon acquisition costs,(447) which was
adopted in the context of acquisitions at prices below book
value, should not be used as justification for perpetuating railroad claims of
revenue inadequacy.

NIAGARA MOHAWK POWER CORPORATION. NIMO, an electric
utility that serves
customers in upstate New York and that also sells electricity in the wholesale
market as a participant in
the New York Power Pool (NYPP), indicates that its interests in this
proceeding are focused on its two
coal-fired generating stations in Western New York: Huntley Station,
located in Tonawanda, NY (on the
Niagara River, 3 miles north of Buffalo, NY); and Dunkirk Station, located in
Dunkirk, NY (on a
peninsula jutting out into the City of Dunkirk harbor on Lake Erie). NIMO
claims: that both stations,
which are rail-served exclusively by Conrail, burn coal obtained from mines in
the Pittsburgh Seam,
which is located in Southwestern Pennsylvania and Northern West Virginia; that,
because Conrail serves
these mines, Conrail has transported coal to Huntley and Dunkirk Stations in
single-line service; that
both stations are primarily dependent on rail service (i.e., Conrail service)
for their coal deliveries;(448)
that, for this reason, both stations are captive to Conrail pre-transaction;
and that, because the
CSX/NS/CR transaction envisions the assignment to CSX of the Conrail lines
serving Huntley and
Dunkirk Stations, both stations will be captive to CSX post-transaction.

(1) NIMO believes that its 1-to-1 Huntley and Dunkirk Stations will be
competitively
disadvantaged vis-à-vis the 1-to-2 plants of competing utilities in the
Detroit SAA and the
South Jersey/Philadelphia SAA. NIMO fears, in particular, that the
CSX/NS/CR transaction will
diminish the ability of its Huntley and Dunkirk Stations: to compete with the
River Rouge and Trenton
Channel plants of The Detroit Edison Company (DEC); and to compete with these
two plants and many
other 1-to-2 plants as respects wholesale energy sales to utilities that are
members of the NYPP and also
to utilities located beyond the limits of the NYPP.

(2) NIMO believes that the acquisition premium and other economic factors
will result in
increases in the rail rates it will have to pay at Huntley and Dunkirk
Stations. NIMO contends: that CSX
and NS, which will have no choice but to pay their respective portions of the
acquisition premium they
incurred to acquire Conrail, will be subject to competitive pressures in
serving 1-to-2 shippers; that,
therefore, it is likely that CSX and NS will attempt to raise the rates charged
their captive shippers; and
that such rate increases will be made even more likely if CSX and NS are unable
to realize the growth
and efficiency gains they have projected.

(3) NIMO concedes that the CSX/NS/CR transaction will result in the
establishment of CSX vs.
NS competition on Conrail's MGA lines (which serve most of the Pittsburgh Seam
mines relied upon by
NIMO) and at the Ashtabula Harbor facility at Ashtabula, OH (at which coal may
be transloaded to lake
vessels for movement to Dunkirk Station). NIMO claims, however, that, because
CSX will control the
destinations at Huntley and Dunkirk Stations, NIMO will not be able to take
advantage of the new
competition at the MGA origins. And, NIMO further claims, it will not benefit
from competition at
Ashtabula either. NIMO contends: that Ashtabula, which is already operating
near capacity, has a
limited coal storage area; that Ontario Hydro, which already accounts for more
than 30% of the total coal
movements at Ashtabula, is expected to vastly increase its own coal shipments
through Ashtabula; that
the increase in coal movements by Ontario Hydro will likely prevent NIMO from
receiving the benefits
of the increase in competition at Ashtabula; and that NIMO's opportunities at
Ashtabula are likely to be
further limited by a natural reluctance on the part of CSX to use its limited
share of capacity at Ashtabula
to compete against itself to move coal to Dunkirk Station.

(4) NIMO believes that the CSX/NS/CR transaction may significantly harm the
ability of the
Bessemer and Lake Erie Railroad (B&LE) to move MGA coal to the Pittsburgh
& Conneaut Dock
Company (P&C Dock) rail/water dock facilities on Lake Erie at
Conneaut. NIMO contends: that water
movements of coal to Dunkirk Station, though limited, have generally moved
through P&C Dock's
Conneaut transloading facilities; that, because B&LE has limited access to
the kind of quality low cost
coal sources found in the MGA area, B&LE will be able to move significant
volumes of coal to
Conneaut only if the coal is originated by CSX and/or NS; but that CSX will
have no incentive to offer
competitive service to Dunkirk Station that would involve an interchange with
B&LE and a subsequent
vessel movement from Conneaut because CSX has no reason to compete with its own
direct rail service
to Dunkirk Station. NIMO also contends that NS will have no incentive to offer
competitive service to
Dunkirk Station that would involve an interchange with B&LE and a
subsequent vessel movement from
Conneaut because Ashtabula and Conneaut are competing facilities, and because
NS (like CSX) will
have access to Ashtabula. NIMO is therefore concerned about the potential loss
of its limited, but
important, rail/vessel (via Conneaut) alternative for moving coal to Dunkirk
Station.

(5) NIMO believes that the CSX/NS/CR transaction will cause competitive
harm to the
Rochester & Pittsburgh Coal Company's Mine 84, an important supplier of
low-sulfur coal to Huntley
and Dunkirk Stations. NIMO contends: that, pre-transaction, Mine 84 coal is
transported by Conrail in a
single-line movement from origin to destination; that, post-transaction, Mine
84 coal will have to be
transported in an NS/CSX joint-line movement (because Mine 84 will be
rail-served exclusively by NS,
whereas Huntley and Dunkirk Stations will be rail-served exclusively by CSX);
and that movements
from Mine 84 to Huntley and Dunkirk Stations will therefore require a switch
from NS to CSX, which
may be subject to a high switching charge.

NIMO therefore asks that we impose conditions intended to alleviate the
anticompetitive effects
that NIMO contends will be created if the CSX/NS/CR transaction is approved
without appropriate
conditions. NIMO, a member of the Erie-Niagara Rail Steering Committee
(ENRSC), asks, in particular,
that we adopt either an ENRSC condition (either ENRSC Condition #1, #2, or #3,
in that order of
preference) or NIMO's own condition (in the event we do not adopt any of the
ENRSC conditions).

ENRSC Conditions. ENRSC Condition #1 contemplates: (i) the
creation of a Niagara Frontier
SAA that would permit equal access by Conrail shippers (including Huntley and
Dunkirk Stations) to
both CSX and NS; and (ii) the establishment within the Niagara Frontier SAA of
reciprocal switching
arrangements for all current Conrail customers (including Huntley and Dunkirk
Stations) that would
allow other rail carriers serving the area to provide competitive service at a
reasonable level of charges
(i.e., $156.00 per car). ENRSC Condition #2 contemplates the reciprocal grant
of terminal trackage
rights by CSX and NS (to NS and CSX, respectively) for operations over the
Conrail lines in the
geographical area of the Niagara Frontier SAA, which would allow all current
Conrail customers
(including Huntley and Dunkirk Stations) to receive rail service directly from
both CSX and NS at a
reasonable level of charges (i.e., $0.29 per car mile). ENRSC Condition #3
contemplates the
establishment by CSX and NS of reciprocal switching to all current and future
customers that are or will
be served by the Conrail lines located within the geographical area of the
Niagara Frontier SAA
(including Huntley and Dunkirk Stations), and further contemplates the
establishment of a reasonable
reciprocal switching charge (i.e., $156.00).

NIMO's Own Condition. NIMO contends that, if we do not adopt any
of the ENRSC conditions,
we should, at the very least, condition approval of the CSX/NS/CR transaction
upon the grant by CSX to
NS of trackage rights that would enable NS to serve Huntley and Dunkirk
Stations. (i) NIMO asks that
we order that NS' overhead trackage rights on Conrail's Belt Line Branch and
Niagara Branch be
modified to allow NS to operate over such tracks and any necessary connecting
tracks for the purpose of
serving Huntley Station. (ii) NIMO asks that we order that NS be granted
trackage rights over Conrail's
Chicago Line between CP 58 (near Westfield, NY) and Dunkirk Station (near CP 42
in Dunkirk, NY) for
the purpose of serving Dunkirk Station.(449)

NORTHERN INDIANA PUBLIC SERVICE COMPANY. NIPS operates
four coal-fired
electric generating stations, all of which obtain their coal supplies virtually
exclusively by rail: the
Bailly Generating Station in Chesterton, IN, which is rail-served exclusively
by the Chicago SouthShore
& South Bend Railroad (CSS); the Michigan City Generating Station in
Michigan City, IN, which is
rail-served by Conrail and CSS; the Mitchell Generating Station in Gary, IN,
which is rail-served
exclusively by EJ&E; and the Schahfer Generating Station in Wheatfield, IN,
which is rail-served
exclusively by Conrail. All of the coal burned at the Bailly, Michigan City
and Mitchell Stations moves
through the Chicago area; and western coal burned at the Schahfer Station also
moves through the
Chicago area.

Service Quality. NIPS fears that the CSX/NS/CR transaction may
result in a degradation in the
quality of service. NIPS therefore asks that we investigate the service
implications of the CSX/NS/CR
transaction, and take all necessary steps to assure that there will be,
following implementation, an
adequate quality of service. NIPS also asks that we adopt a mechanism to allow
for the prompt
identification and correction of any resulting inadequacy in the quality of
service.

Indiana Harbor Belt Railway. NIPS fears that the CSX/NS/CR
transaction, by transferring
Conrail's 51% stake in IHB to CSX and NS, will give CSX and NS a dominating
position in the Chicago
area, which they may be able to use as leverage outside that area. NIPS
therefore asks that we preserve
the independence of IHB by conditioning any approval of the primary application
upon the transfer, to
EJ&E and I&M, of Conrail's 51% stake in IHB. NIPS contends that this
would preserve the
independence of IHB and thereby enable those who must route via IHB to avoid
the unfair,
discriminatory, and/or anticompetitive treatment that can result from a loss of
independence.(450) NIPS
adds that a less desirable alternative solution would involve conditions
intended: (i) to assure
nondiscriminatory dispatch of rail traffic over IHB; and (ii) to preclude CSX
and NS from quoting or
utilizing joint or through rates that include service on IHB or the other
Chicago district carriers
controlled by CSX and/or NS.

ORANGE AND ROCKLAND UTILITIES. O&R, an electric
utility, indicates that its Lovett
Plant, located in Tomkins Cove, NY (on the west side of the Hudson River,
about 25 miles north of
New York City), is a key component of its generating system, accounting
for more than a third of its
total generating capacity. O&R notes: that Lovett is rail-served
exclusively by Conrail, which currently
delivers, in unit train service, all of the coal burned at Lovett; that 90% of
this coal is originated by NS,
and moves in joint-line NS/Conrail service under rail transportation contracts
(the traffic is interchanged
either at Hagerstown, MD, or at Buffalo, NY);(451) that, for environmental reasons, O&R
must burn
extremely low-sulfur "supercompliance" coal; and that, as a practical matter,
this coal must be obtained
from one of the handful of mines in Central Appalachia known to produce this
coal in volumes suitable
for unit-train loading.(452)

Because the CSX/NS/CR application contemplates the assignment to CSX of
Conrail's River
Line (on which Lovett is located), the Lovett destination service provided
pre-transaction by Conrail will
be provided post-transaction by CSX. O&R acknowledges, in essence, that it
is a 1-to-1 shipper, and
acknowledges too that CSX's ability to offer single-line service to Lovett may
offer certain advantages.
And O&R concedes that it understands that, post-transaction, CSX and NS
will assume Conrail's
obligations under O&R's existing contracts, making only those changes
necessary to reflect line transfers
and modified interchange points, with rates to be adjusted accordingly.
O&R is nevertheless concerned
that it may be adversely impacted by the CSX/NS/CR transaction in two
respects. (1) O&R is concerned
that implementation of the CSX/NS/CR transaction will be marred by the kinds of
service problems that
occurred in Texas as the UP/SP merger was being implemented. O&R,
which claims that pre-transaction
Conrail service is poor, warns that it would be adversely affected if present
service problems were to be
exacerbated as a result of the CSX/NS/CR transaction. (2) O&R claims that,
because Conrail has not had
access to supplies of supercompliance coal sufficient to meet Lovett's needs
(and because Conrail has
therefore been unable to use its market dominance over Lovett to force O&R
to take all of its coal from
Conrail-served mines), O&R has benefitted from competition between CSX and
NS, and also between
CSX-served mines and NS-served mines, respecting originations of
supercompliance coal. O&R fears,
however, that this competition will cease to exist post-transaction, because
CSX, which will have direct
access to Central Appalachian low-sulfur coal mines, will have the ability
and an incentive to manipulate
its rates to make the delivered price of NS-originated coals noncompetitive.
The problem is especially
serious, O&R adds, because NS-served mines are today O&R's principal
suppliers, and also because
more than half of the supercompliance coal reserves are accessible only by
NS.(453)

O&R asks that we impose conditions intended to mitigate the adverse
effects it anticipates. (1)
Condition #1 would require the Board to retain jurisdiction over implementation
of the CSX/NS/CR
transaction. This condition, O&R notes, would enable us to monitor the
actions taken by CSX and NS in
absorbing their respective portions of Conrail. (2) Condition #2 would require
that NS be granted
trackage rights over Conrail lines extending from Northern New Jersey (probably
Oak Island Yard) to
Lovett. Condition #2, O&R contends: would permit CSX and NS, and the
Central Appalachian mines
they serve, to compete based on price and quality; would thereby mitigate the
danger of foreclosure or
exclusionary pricing by CSX; would also mitigate the risk of post-transaction
delays and other service
problems; and would provide some assurance that O&R's ability to compete
with other generating
companies will not be compromised. (3) Condition #3 (intended as an
alternative to Condition #2)
would require CSX to establish reasonable interchange rates from the nearest
CSX/NS interchange point
(probably Oak Island Yard).

ROCHESTER GAS AND ELECTRIC CORPORATION. RG&E's
Russell Station, a coal-burning electric generating station located in Greece,
NY (just north of Rochester, NY), relies principally
on coal originated at mines located in the Monongahela Valley of Northern West
Virginia. Pre-transaction, both the mines and Russell Station are rail-served
exclusively by Conrail. Post-transaction:
the mines will be rail-served by CSX and NS; but Russell Station will be
rail-served exclusively by CSX.
RG&E warns that, for shippers such as itself, the benefits of the new
competition on Conrail's MGA
lines will prove illusory; little real benefit can be realized, RG&E
contends, so long as the destination leg
of the transportation is locked up by a single carrier. And, RG&E adds,
because the new CSX vs. NS
competition will benefit RG&E's competitors but not RG&E, RG&E will
be placed at a competitive
disadvantage in the wholesale and retail power markets. RG&E therefore
asks that we impose four
conditions.

Condition #1 would require, in general, the creation of genuine competition
in the Rochester area
between at least two long haul rail carriers, and would require, in particular,
the creation of genuine
competition for coal originated on Conrail's MGA lines and moving to Russell
Station. RG&E suggests
either: (a) access by NS, and perhaps by other carriers as well, to Conrail's
east-west route through
Rochester, between MP 437 at Buffalo and MP 335 at Lyons; or (b) access by one
or more shortlines to
Conrail's Corning Secondary, between MP 0 at Lyons and MP 70 at Corning, to
bridge the gap between
Rochester in the north and NS' Southern Tier route in the south. RG&E adds
that it would be particularly
helpful if carriers in addition to CSX could be given access to Conrail's
10-mile Charlotte Running
Track, which runs between the connection with the Conrail main line at CP 373
in the western part of
Rochester to Russell Station in the adjoining suburb of Greece.

Condition #2 would bar CSX and NS from charging exorbitant fees for
essential services such as
switching traffic from one carrier to the other (particularly as respects the
routing of RG&E coal traffic)
and would require the Board to provide an inexpensive procedure for determining
a fair,
nondiscriminatory switching charge in locations pertinent to coal delivery to
Russell Station. A railroad,
RG&E contends, should not be allowed to use excessive switching charges and
similar mechanisms to
force a shipper to use a routing that, though less efficient from the shipper's
perspective, is more
profitable from the railroad's. Condition #2, RG&E adds, is important in
its own right, but would be
more important if the fully open, end-to-end route competition contemplated by
Condition #1 is not
achieved.

Condition #3, which reflects RG&E's concern that CSX and NS may intend
to compete head-to-head only in the areas in which the CSX/NS/CR application
specifically prescribes joint access, would
require, in general, that CSX and NS compete vigorously for any traffic that
each is operationally
capable of handling. And, with an eye to our BottleneckII
decision,(454) Condition #3 would require, in
particular, that, in those instances in which one carrier (NS or CSX,
respectively) operates only a
segment of a route between a certain origin and a certain destination, and the
other carrier (CSX or NS,
respectively) operates the entire length of a route between that origin and
that destination, the carrier
operating only the segment (NS or CSX, respectively) must be open to reaching
reasonable contract
provisions with shippers as respects the segment over which it can operate.

Condition #4, which would bring switching charges into the context of the
BottleneckI(455) and
BottleneckII decisions, would apply in any situation in which a
shipper has entered into a contract with a
non-bottleneck carrier with respect to a movement of freight from an origin to
an interchange point with
the bottleneck carrier. Condition #4 would require the bottleneck carrier to
include, as part of its
challengeable offer of service over the bottleneck segment, any switching
charges necessitated by the
inter-carrier connection, at a price reasonably related to the cost of such
switching service. RG&E
suggests, as an alternative, that the shipper could be allowed to elect to have
any switching charges
become a part of the Board's interconnection point resolution in those
instances in which the carriers
cannot themselves agree on an interconnection point.

APPENDIX G: CHEMICALS/PLASTICS SHIPPERS

ASHTA CHEMICALS. ASHTA, which manufactures chemical
products at its facility on the
south shore of Lake Erie in Ashtabula, OH, claims that it is now captive
to Conrail, and further claims
that its products: are first transported from ASHTA's plant to Conrail's West
Yard, located
approximately 6 miles west of ASHTA's plant; are then transported from West
Yard northeast to Buffalo,
NY; and are then transported to their final "ship-to" destinations. ASHTA
contends that, because Conrail
has been the only railroad providing transportation services to ASHTA out of
West Yard, ASHTA has
had no choice but to accept Conrail's via-Buffalo routing even as respects
products being shipped to
western and southern destinations.

The CSX/NS/CR transaction contemplates a division of Conrail's lines in and
around Ashtabula.
Conrail's east-west line through Ashtabula will be assigned to CSX; Conrail's
north-south line ending at
Ashtabula will be assigned to NS. Because ASHTA's plant is apparently located
on, or off of, the east-west line, the CSX/NS/CR transaction will involve, from
ASHTA's perspective, the substitution of CSX
for Conrail. Nothing will have changed, ASHTA contends: it will still be a
captive shipper; and it will
still be forced to ship its freight to Buffalo for routing to southern and
western destinations.(456)

ASHTA insists that, if the CSX/NS/CR transaction is approved as proposed,
there will be no
economically feasible competitive alternatives available to ASHTA and other
similarly situated shippers
of liquid freight.(457) ASHTA contends that:
there will be no effective intramodal competition because
such shippers will have access to one railroad only (CSX, if the shipper is
located on the east-west line;
NS, if the shipper is located on the north-south line); and there will be no
effective intermodal
competition either because shipping via the Great Lakes is impracticable
(as respects southern and
western destinations) and because trucking is simply not a feasible
alternative. Nor, ASHTA adds, will
there be any effective geographic competitive alternatives because there are so
few alternative sources of
ASHTA's products. And, ASHTA contends, approval of the CSX/NS/CR transaction
as proposed will
put ASHTA and similarly situated shippers at a competitive disadvantage as
compared to other shippers
that will receive, as a consequence of the transaction, either better service,
more direct routes, new rail
network, new physical plant, or other improvements.

Condition #1: Competitive Access. Invoking both
49 U.S.C. 11102 and 49 U.S.C. 11324(c),
ASHTA asks that we require the establishment of a reciprocal switching
arrangement or other
competitive access remedy in the Ashtabula area, at or near West Yard.
ASHTA contends that some
such competitive access remedy is necessary: to prevent acts that are
anticompetitive or otherwise
contrary to the policies of the Staggers Act; to promote balanced competition;
to promote public health
and safety;(458) and to promote energy
conservation. ASHTA adds that a competitive access remedy is
feasible (ASHTA claims that there are two locations at and near West Yard where
interchange and
switching by and between carriers could be accommodated) and would be used by
ASHTA to meet a
significant portion of its shipping needs.

Condition #2: Oversight. ASHTA also asks that we establish an
ongoing oversight committee
to monitor implementation of any conditions imposed in this proceeding and to
ensure against any
deterioration in service quality and the occurrence of any anticompetitive
abuses.

E.I. DUPONT DE NEMOURS AND COMPANY. DuPont, a diversified
chemical and energy
corporation, maintains that safe, reliable, efficient, and predictable rail
transportation at competitive rates
is essential if DuPont and other domestic manufacturers and producers are to
properly serve their
customer bases. DuPont contends, however, that, due to the present-day
concentration in the rail
industry, the normal incentives and constraints that exist in competitive
markets are no longer as
effective in the rail sector as they once were. DuPont adds that action must
be taken to ensure that
implementation of the CSX/NS/CR transaction does not result in a repetition of
the unfortunate
experiences that occurred during implementation of the UP/SP merger.

DuPont, which generally supports the conditions advocated by CMA and SPI,
has also submitted
several recommendations of its own. (1) DuPont recommends that we utilize the
services of
"independent rail service experts" in conducting our evaluation and review of
the operational plans of
CSX and NS. (2) DuPont recommends that we create a "Rail Service Committee"
made up of shippers,
consumers, academics, carrier personnel, and government experts. The principal
function of the Rail
Service Committee would be to define appropriate "benchmarks" or "service
metrics" against which the
future performance of CSX and NS could be measured. (3) DuPont recommends that
we create a "Rail
Safety Committee" made up of shippers, hazardous materials experts, experienced
rail operations
personnel, and government safety experts. The principal function of the Rail
Safety Committee would be
to establish "benchmarks" or "safety metrics" against which the safety
performance of CSX and NS
could be measured. (4) DuPont, which is concerned by the amount of the
"acquisition debt" incurred by
CSX and NS, recommends that we ensure that shippers are not called upon to
"pay" for this debt either
directly through increased rates or indirectly through decreased service
levels, increased safety risks, or
neglect of the rail infrastructure. (5) DuPont, which is concerned that
CSX and NS, in their efforts to cut
costs, may terminate too many Conrail personnel too soon, recommends that we
ensure that critical
Conrail operating and supervisory personnel are not "encouraged to leave" or
otherwise dismissed until
all CSX/CR and NS/CR service elements are fully integrated and demonstrated to
be working efficiently
and well.

FINA OIL AND CHEMICAL COMPANY. Fina, a chemical company
with production
facilities located primarily along the Texas and Louisiana Gulf Coast, opposes
the CSX/NS/CR
transaction. Fina warns: that service disruptions may occur during
implementation of the transaction;
that shippers may experience decreased service levels both in the short term
and in the long term; that,
although the creation of the SAAs should provide certain benefits to shippers,
service in the SAAs may
be inadequate; and that, if applicants' post-transaction traffic and cost
projections are not fully realized,
shippers may be called upon to bear the cost of the transaction in the form of
increased rates. Fina adds
that, if we approve CSX/NS/CR application, we should, at a minimum, impose the
conditions advocated
by CMA and SPI.

MILLENNIUM PETROCHEMICALS. Millennium, a chemical company
with facilities
located throughout the United States, fears that the CSX/NS/CR transaction
will have negative
operational impacts at its Conrail-served regional distribution center (RDC) at
Finderne, NJ, which is
located on an NJT line over which Conrail has trackage rights. Millennium
contends: that, because the
Finderne RDC's rail yard is split in two by the NJT line, Conrail serves this
facility via two sidings (one
located north of the NJT line, and one located south of the NJT line); that, to
avoid interference with NJT
service, Conrail's switching operations at the Finderne RDC are subject to
various operational
constraints; that, because of these constraints and also because there are only
115 rail car spots on-site,
the efficient switching of rail cars from marshaling yards and storage tracks
to/from the Finderne RDC is
crucial; that, in general, the marshaling of rail cars for switching to/from
the Finderne RDC is out of
Conrail's Manville Yard on the Lehigh Line; that, when Manville Yard is full,
Conrail stores rail cars
destined for the Finderne RDC at Croxton Yard or Elizabethport Yard; and that
Millennium also
maintains leased track at Bound Brook and South Plainfield on the
Lehigh Line to accommodate
overflow from the Finderne RDC.

Millennium claims that the CSX/NS/CR transaction contemplates: that
Finderne and
Croxton Yard will be allocated to NS; that Manville Yard and Elizabethport
Yard will be allocated to
CSX; and that Bound Brook and South Plainfield will become part of the North
Jersey SAA.
Millennium is concerned that, whereas one carrier now provides both the line
haul service and the
switching service, the transaction will result in a situation in which two
carriers (CSX and NS) will have
to coordinate and cooperate in order to switch rail cars into and out of the
Finderne RDC. Millennium
claims: that the CSX and NS operating plans fail to address fully just how
this cooperation and
coordination will be accomplished; and that it is not clear from the operating
plans that there will be
sufficient marshaling yard space for NS in Manville Yard. Millennium therefore
asks that we require:
(1) that the North Jersey SAA be expanded to include the Finderne RDC and
Manville Yard; and (2) that
the Conrail Shared Assets Operator (CSAO) provide local switching. This
condition, Millennium
claims, is necessary to maintain the status quo and to prevent the undue
hardship that would be suffered
by Millennium under the proposed allocation of Conrail's operations and assets.

OCCIDENTAL CHEMICAL CORPORATION. OxyChem, a chemical
corporation, supports
the primary application but asks that we impose a number of conditions that are
similar to though not as
elaborate as: the "Pre-Implementation Conditions" urged by CMA and SPI; the
"Post-Implementation
Rate Conditions" urged by NITL, CPTA, and TFI; the "Oversight and Other
Conditions" urged by CMA
and SPI; and the "Additional Conditions" urged by CPTA.

PPG INDUSTRIES. PPG, a corporation with facilities in the
United States and other countries,
ships substantial volumes of chemicals by rail throughout North America. The
CSX/NS/CR transaction,
PPG contends, will eliminate yet another Class I railroad; it will eliminate
shipper options; it will have a
negative impact on whatever geographic competition is now available to
competitive traffic moving to
current Conrail markets. PPG therefore believes that the CSX/NS/CR transaction
should not be
approved, unless certain conditions are imposed on CSX and NS. PPG suggests,
among other things:
that the necessary operating plans, labor agreements, and computer systems
should be put in place prior
to implementation of the transaction; that interchange and junction points
should be maintained and kept
open; that competitive access, divestitures, and reciprocal switching should be
implemented wherever
possible to maintain rail-to-rail competition; that reciprocal switching
charges should be capped at a
reasonable figure ($150); that the practice of single-served origins remaining
served by one carrier
should be discarded; that rate increases on captive traffic created by this
transaction should be capped,
and should not exceed a formula such as the RCAF, for a specified period; that
market dominance, using
stand-alone costs, should not be an acceptable defense for the railroads; that
oversight should be
maintained for at least 5 years; that the oversight conditions should include
reports from CSX and NS on
the progress and implementation of the transaction; and that the shipping
industry should have an
opportunity to comment on these matters.

PPG has also raised two issues specific to itself. (1) PPG indicates
that its facility in
Beauharnois, Quebec, is currently served by Conrail but is open to CN and,
through the Canadian
switching regulations, is accessible to CP. The CSX/NS/CR transaction
contemplates the assignment of
the relevant Conrail line to CSX. PPG contends: that the level of service
provided pre-transaction by
Conrail must be provided post-transaction by CSX; that the terms and conditions
of the current Conrail
contract (which apparently involves both Conrail and CN) must be honored by
CSX; that access to the
other railroads must be maintained; and that switching charges must be
maintained at or below the
current levels. (2) PPG concedes that its facility in Natrium, WV, is
rail-served exclusively by CSX, but
claims that the CSX/NS/CR transaction, by virtually eliminating geographic
competition in the eastern
United States, will reduce PPG's competitive options on traffic moving from/to
Natrium. PPG therefore
suggests that we should allow a second railroad (apparently NS) to serve the
Natrium facility. PPG adds:
that another option would be the W&LE, which currently interchanges with
CSX at Benwood, WV
(approximately 35 miles north of Natrium); and that, if W&LE service
to Natrium is not operationally
practical, we should establish a reasonable haulage arrangement or proportional
rate between Natrium
and Benwood.(459)

SHELL OIL COMPANY & SHELL CHEMICAL COMPANY. Shell,(460) which owns and
operates petrochemical plants served by CSX, NS, and Conrail, insists that the
CSX/NS/CR transaction
poses three dangers to shippers in general and to Shell in particular: service
deterioration; acceleration
of rate increases; and a continued decrease in railroad competition. Shell has
therefore recommended
certain conditions that, Shell contends, should be imposed to facilitate
integration of the CSX/CR and
NS/CR networks, to increase competition, and to protect captive shippers.
These conditions, Shell adds,
should remain in place for an oversight period of 5 years.

Operations. Shell contends: that baseline measurements based on
current safety and service
levels should be established for each operating territory; that annual goals
for each of the measurements
should be established; that quarterly progress reports should be submitted to,
and published by, the
Board; that shipper and connecting carrier input should be solicited annually;
and that the Board should
establish, for sub-standard safety and service levels, consequences (e.g.,
reparations, fines, and
temporary transfers of operating authority) and a mechanism by which such
consequences could be
invoked. Shell further contends that, prior to final transaction approval,
applicants should be required:
to complete all labor agreements necessary to operate the SAAs as well as the
acquired Conrail lines; to
submit detailed operating plans for all the SAAs; and to present a plan to
handle the disposition of
contracts for movements from, to, or within the current Conrail system.

Economics. Shell, which insists that it needs rate relief for its
captive facilities, contends: that,
in a rate complaint case, the market dominance determination for any shipper
served by any one of the
three applicants should be predicated only on the presence or absence of
intramodal competition; that
rates on new traffic by a market dominant applicant should be limited to the
level of the regulatory
threshold; that rate increases by a market dominant applicant should be limited
by the RCAF-A, unless
that carrier proves that the proposed rate is at or below the regulatory
threshold; and that the acquisition
premium should not be included in the revenue adequacy calculation or used in
the determination of the
regulatory threshold. Shell further contends that progress reports on the
capital investment proposed in
the application should be required annually of all parties.

Competition. Shell contends: that a reciprocal switching system
such as the Canadian
interswitching system should be implemented; that all points that now enjoy
reciprocal switching should
be kept open; that reciprocal switch charges should be set at $130 per car;
that all gateways should be
maintained; that the railroads should be required to honor a shipper's gateway
choice, and should be
required to establish reasonable divisions over the gateway chosen by the
shipper; that NS gateways in
Illinois with UPRR (at Sidney, IL) and IC (at Tolono, IL) should be evaluated
to ensure sufficient
capacity to handle traffic moving from Texas and Louisiana Gulf Coast
refineries to points in the
Northeastern United States;(461) that the SAA
concept should be extended to Indianapolis, Cincinnati, and
West Virginia; and that any shipper currently switched by the IHB should retain
the right to route its
traffic to the line-haul carrier of its choice.

UNION CAMP CORPORATION. Union Camp, which claims that its
chemical plant in
Dover, OH, is dependent on rail for the inbound transportation of raw
materials, contends: that this plant
is located near MP 71 on the line between Warwick and Uhrichsville, OH;
that, until 1990, this line was
owned and operated by CSX; that, in 1989, CSX and R.J. Corman filed an
application (the original
application) for approval of the purchase of the line by R.J. Corman;
that, in connection with the original
application, CSX assured Union Camp that ownership of the line by R.J. Corman
would improve
competition because R.J. Corman would have access not only to CSX (at Warwick,
OH) but also to NS
and Conrail (at Massillon, OH); that, however, after the time for submitting
comments had passed, CSX,
without any prior notice to Union Camp, filed an amendment to the application;
that the amended
application provided that R.J. Corman would purchase only a portion of the
line (the portion between MP
108.4 at Warwick and MP 74.6 at Dover) and would lease the remainder of the
line (the portion between
MP 74.6 at Dover and MP 59.5 at Uhrichsville, on which portion the Dover
plant is located). Union
Camp also indicates that the lease agreement that was ultimately executed
between CSX (as lessor) and
R.J. Corman (as lessee) contains a provision (hereinafter referred to as
the blocking provision) that
assesses a substantial penalty whenever R.J. Corman interchanges traffic moving
from/to points on the
leased portion of the line with any carrier other than CSX. Union Camp
contends that, by virtue of the
blocking provision, it has been deprived of the competition that CSX used to
induce Union Camp to
support the original application.

Union Camp, which claims that the CSX/NS/CR transaction will adversely
impact competition
for shippers on the leased portion of the Warwick-Uhrichsville line by
eliminating competition from
carriers other than CSX, asks that we require the removal of the blocking
provision from the R.J. Corman
Sale/Lease Agreement. Retention of the blocking provision, Union Camp
claims, will destroy any
competition that currently exists and will ensure that no meaningful rail
competition will exist in the
future; whereas removal of the blocking provision, Union Camp contends, would
provide shippers on the
leased portion of the Warwick-Uhrichsville line with true CSX vs. NS
competition (because the
CSX/NS/CR transaction contemplates that the Conrail line through Massillon will
be assigned to NS).
Class I railroads, Union Camp adds, should not be permitted to utilize such
anticompetitive provisions
either when merging or when selling off branch track to shortlines.(462)

WESTLAKE GROUP OF COMPANIES. Westlake, a petrochemical
and plastics
manufacturer, asks that we act to assure that an economically viable rail
transportation system will be
sustained in the post-transaction environment. (1) Westlake, which notes
that only nine of its
approximately 49 Conrail destinations will be located in an SAA, urges us
to put in place a mechanism to
remedy any adverse post-transaction rate actions. (2) Westlake, which contends
that it is important that
shippers be allowed to choose carriers, routes, and particularly interchanges
in the movement of freight,
urges us to protect the ability of shippers to choose interchange points across
the post-transaction Conrail
property. (3) Westlake, noting the service problems that occurred as the
UP/SP merger was being
implemented, asks: that we require CSX and NS to provide safeguards to assure
adequate service; and
that we require that any substantiated service deficiency claims will be
reimbursable by the railroads for
a period of up to 5 years from the effective date of the transaction.

APPENDIX H: OTHER SHIPPERS & COMMERCIAL
INTERESTS

A.E. STALEY MANUFACTURING COMPANY. Staley, a corn refiner
with processing
plants in Illinois, Indiana, and Tennessee, which ships products via rail to
locations throughout North
America, supports the CSX/NS/CR application but asks that we consider two
matters. Stanley is
concerned about: (1) the potential for disruption of service when Conrail's
operations are ultimately
divided between CSX and NS; and (2) the effect that CSX's control and
administration of the IHB will
have on the switching services that IHB now provides in the Chicago switching
district. It would be
best, Staley suggests, if CSX and NS were to develop sound operating plans
before integrating the
Conrail lines into their respective operations. Staley asks that we consider
conditions to assure that IHB
operations and facilities are dispatched on a fair and neutral basis, and to
prevent IHB from being
operated primarily for the benefit of CSX.

AK STEEL CORPORATION. AK Steel, which produces iron and
steel at its plants at
Middletown, OH, and Ashland, KY, claims that the CSX/NS/CR transaction will
have an adverse impact
as respects the rail service available at Toledo, OH. AK Steel indicates:
that it uses iron ore obtained
from the region around the upper Great Lakes and similar areas; that much
of that iron ore is transported
via lake vessel to lower lake ports for further movement by rail to Middletown
and Ashland; that, at
present, all of AK Steel's iron ore moving by lake vessel moves via the Toledo
Docks located at or near
Toledo;(463) and that this iron ore is
currently transported by CSX from the Toledo Docks to Middletown
and Ashland. AK Steel is concerned that, whereas it can now obtain rail
service from either CSX or
Conrail for the movement of iron ore from the Toledo Docks to Middletown and
Ashland, it may
henceforth be able to obtain that service only from CSX.(464)

AK Steel's Comments (filed October 21, 1997). AK Steel argued in
its comments that certain
provisions contained in the Transaction Agreement and in the various ancillary
agreements attached
thereto suggest that CSX will have, post-transaction, exclusive access to the
Toledo Docks. AK Steel
conceded: that one of the ancillary agreements purports to grant NS trackage
rights over the line of the
former Toledo Terminal Railroad Company over which Conrail, via trackage
rights of its own, now
accesses the Toledo Docks; and that the trackage rights to be granted to NS are
purportedly intended to
allow NS to access the Toledo Docks. AK Steel claimed, however, that the
trackage rights that NS is to
receive are such that, if certain details are read literally, NS will not
actually be able to access the
Toledo Docks. AK Steel added that its view was consistent with the
related application filed in STB
Finance Docket No. 33388 (Sub-No. 26) (seeking approval for the acquisition by
CSX of control of
LD&RT). Control of LD&RT by CSX, AK Steel claimed, will make it
impossible for NS to have any
role in the management and operation of the Toledo Docks.

Applicants' Rebuttal (filed December 15, 1997). Applicants,
though insisting that they intend
that the Toledo Docks will be accessible post-transaction by both CSX and NS,
have all but conceded
that a literal reading of the relevant ancillary agreement (CSX/NS-25,
Volume 8B at 489-95) supports
AK Steel's claim that the trackage rights provided for in that agreement
will not actually allow NS to
access the Toledo Docks. See CSX/NS-176 at 70-71. Applicants
claim, however, that, pursuant to the
further agreements that will be entered into pursuant to the provisions of the
Transaction Agreement: the
various agreements by virtue of which Conrail has enjoyed equal access to the
Toledo Docks will survive
the CSX/NS/CR transaction for the benefit of NS; NS will obtain all trackage
rights and operating rights
currently held by Conrail on CSX that provide access to the Toledo Docks; and
PRR will be assigned all
of Conrail's rights under the Toledo Docks Operating Agreement and the TORCO
Operating Agreement
such that NS will have the same operating rights that Conrail presently has to
operate the Toledo Docks.
See CSX/NS-176 at 68-73. Applicants further contend, with respect to
the Sub-No. 26 application, that
CSX's control of LD&RT will not change the operational status quo.
See CSX/NS-176 at 72.

AK Steel's Brief (filed February 23, 1998). AK Steel has made, in
its brief, two requests. (1) AK
Steel asks that we require applicants to implement promptly their commitments
to enter into all further
agreements that are needed to vest in and assign to NS all of Conrail's rights
relating to the Toledo
Docks. (2) AK Steel, which contends that it is Conrail's 50%
ownership interest in LD&RT that has
given Conrail both the economic motivation and the legal leverage to obtain the
equal right of access to
the Toledo Docks, asks that we disapprove the Sub-No. 26 application and
require that this application
be amended to provide for the transfer to NS of Conrail's 50% ownership
interest in LD&RT.

AMERICAN TRUCKING ASSOCIATIONS. ATA, the national trade
association for the
trucking industry, has addressed five topics: intermodal highway equipment;
rail/highway grade
crossings; "back solicitation" and similar practices; discrimination by
railroads against motor carriers;
and options to ensure competition and service.

Intermodal Highway Equipment. ATA notes that, although a motor
carrier participating in an
intermodal haul may provide the power equipment, another entity (generally a
railroad or its
subcontractor, or a steamship line or its subcontractor) provides the trailer,
or the chassis and container,
that the motor carrier hauls. The motor carrier, ATA contends, has no control
over the maintenance and
repair of, and no real opportunity to inspect, the highway equipment provided
by the railroad or other
entity. ATA argues, in essence, that this arrangement is neither fair nor
safe, because federal motor
vehicle safety regulations do not require the non-motor carrier owner or
operator of intermodal highway
equipment either to maintain the equipment or otherwise to comply with the
equipment safety
requirements. ATA concedes, in essence, that the problem predates the
CSX/NS/CR transaction, but
contends that the problem will be greatly exacerbated by this transaction,
which (applicants have claimed
and ATA is willing to concede) will result in the diversion of large numbers of
highway movements to
intermodal service. ATA therefore asks that we require applicants to ensure
the roadworthiness of all
intermodal equipment prior to releasing the equipment to a motor carrier for
highway use. The condition
ATA has in mind: would make applicants responsible for the condition of the
equipment they tender to
motor carriers; would require an applicant railroad or an entity operating the
intermodal facility at which
the equipment is stored and interchanged on behalf of an applicant railroad to
perform inspections and
effect repairs; and would require applicants to comply with federal safety
rules with which they would
not otherwise be required to comply.

Rail/Highway Grade Crossings. ATA concedes, in essence, that the
dangerous conditions that
exist at too many rail/highway grade crossings predate the CSX/NS/CR
transaction, but contends that
these conditions will be exacerbated by this transaction because the
transaction, if it results in an increase
in rail movements, is certain to result also in an increase in grade crossing
accidents. ATA therefore asks
that we require applicants to make a financial and operational commitment to
improve or remove the
many hazardous rail/highway grade crossings on Conrail's lines. The condition
contemplated by ATA
would require applicants: to identify each crossing by number; to post an 800
telephone number at each
crossing; to provide emergency communication devices (e.g., telephones) at all
rural crossings; and to
improve the quality of all crossings, with better grading, better markings, and
more effective warning
devices.

"Back Solicitation" and Similar Practices. ATA claims that NS
has, and that CSX and Conrail
may have, begun to require motor carriers purchasing intermodal transportation
to provide the supplier
railroad with the name of the motor carrier's customers. ATA contends: that
this practice, which (ATA
claims) is intended to facilitate "back solicitation" by the railroad, is both
unethical and of questionable
legality; that, when the motor carrier is purchasing the intermodal service,
the motor carrier (and not the
consignor) is the party with privity of contract with the railroad and the party that is liable to the railroad
for the freight charges; that, for this reason, the railroad has, in this
context, no privity of contract with
the consignor and no legitimate need to know its name; but that the motor
carrier has, as a practical
matter, no choice but to comply with the railroad's requirements. ATA
concedes, in essence, that the
basic problem predates the CSX/NS/CR transaction, but contends that the problem
will be exacerbated
by the transaction because motor carriers will have, post-transaction, even
fewer options with respect to
the availability of rail service. ATA therefore asks that we direct applicants
to cease "back solicitation"
and other anticompetitive practices.

Discrimination By Railroads Against Motor Carriers. The Nation's
railroads, ATA contends,
wholesale their intermodal services via a number of different marketing
channels, each of which is
distinct as to the party through which the service is sold, the service itself,
and the ownership of the
equipment used; and ATA claims that, in this environment, motor carriers need
protection against the
railroads' potential use of unfair service offerings and pricing practices that
unreasonably favor one
channel over another. ATA indicates, by way of example: that NS may be
tempted to favor its Triple
Crown subsidiary in competition with non-affiliated motor carriers; and that
CSX may be similarly
tempted to use its CSXI subsidiary to gain market share relative to
non-affiliated motor carriers. ATA
concedes, in essence, that the problem predates the CSX/NS/CR transaction, but
contends that the
problem will be exacerbated by the increase in rail industry consolidation that
will accompany the
transaction. ATA therefore asks that we take steps to ensure: that applicants
do not practice channel
management ("discrimination"); that applicants do not retaliate against
non-affiliated motor carriers or
intermodal management companies; and that all motor carriers and intermodal
management companies
are provided reasonable and nondiscriminatory rates and services.

Options To Ensure Competition And Service. ATA urges us to ensure
that the procompetitive
benefits of the CSX/NS/CR transaction will be realized and that service will
not be allowed to deteriorate
post-transaction. ATA suggests three options. (1) ATA suggests that the
SAAs should be expanded
beyond the narrow zones urged by applicants. (2) ATA suggests that we should
consider conditions to
ensure that shortlines will be able to provide connecting service between the
communities they serve and
the connections with other Class I railroads. (3) ATA suggests that we should
consider proposals for
"open access" (also known as "competitive access") which, ATA contends, would
inject competition into
previously noncompetitive areas of rail service.(465)

APL LIMITED. APL, which operates fleets of
containerships, containers, and doublestack
railcars, and which specializes in the transportation of containers moving in
international and domestic
commerce, indicates that its interests in this proceeding are focused upon two
distinct traffic flows that
involve Conrail: international traffic moving between ports in Asia and the
Pacific Rim, on the one
hand, and, on the other, points in the Northeastern United States; and
North American traffic moving
either within the continental United States or between Canada and Mexico. APL
claims that the
APL/Conrail relationship reflects both a long-term contract (which runs until
May 31, 2004) and also the
years of joint effort APL and Conrail have invested in the development of a
superior container service.
APL emphasizes that its business is critically dependent upon quality Conrail
service; Conrail, APL
notes, is today, and has been for more than 20 years, APL's link to the APL
terminals (including the APL
terminal at South Kearny, NJ) that cover the Eastern United States consuming
markets.(466)

APL claims that one of its principal competitors is CSX, whose ocean
carrier and stacktrain
subsidiaries (Sea-Land and CSXI, respectively)(467) compete head-to-head with APL as respects
the
transportation of time-sensitive commodities from points in Asia and the
Pacific Rim to points in the
Eastern United States. And, APL adds, APL and CSXI, the two national
stacktrain operators, compete
head-to-head in every major transportation corridor within the United States.

Anticipated Impacts. APL's concerns with the CSX/NS/CR
transaction are focused primarily
upon section 2.2(c) of the Transaction Agreement, which provides for the
allocation, between CSX and
NS, of Conrail's Existing Transportation Contracts. See CSX/NS-25,
Volume 8B at 25-29. APL
contends that it will be adversely impacted by section 2.2(c) in several
respects.

(1) APL claims that section 2.2(c), by locking APL into contractual
relationships with CSX and
NS until May 31, 2004, will impose a severe competitive disadvantage upon
APL vis-à-vis those of its
competitors that will be free to exploit CSX vs. NS competition at an earlier
date.

(2) APL claims that the administration of its contract by CSX and NS will
be unworkable. APL
contends that certain matters (e.g., day-to-day coordination) that can now be
worked out with one carrier
will henceforth have to be negotiated with two. APL concedes that certain
other matters (e.g., services
provided at certain terminals) will be handled by a single carrier, but that
single carrier, APL fears, will
be APL's primary competitor, CSX. And there will also be, APL adds,
difficulties of an antitrust nature.
APL claims: that the "most favored nation" (MFN) clause in its Conrail
contract,(468) when triggered by a
rate action of CSX or NS, will require inappropriate communications between CSX
and NS
(inappropriate, because CSX and NS will be competitors); that routine
administration of the MFN clause
may allow APL to gain information about CSXI's commercial business; and that,
at "dual points" served
by both carriers, any rate adjustments desired by APL will require the consent
of both CSX and NS.(469)

(3) APL claims that the very process of partitioning Conrail's existing
contracts raises antitrust
concerns. Applicants, APL claims, envision that they will determine, after the
Control Date, whether
CSX or NS will operate a contract that could be operated by either (i.e., a
contract that involves service
between "dual" points). APL notes: that, to make that determination, CSX and
NS will have to review
each contract; that, therefore, CSX and NS will necessarily have to share rate
information; and that, no
matter which railroad is chosen to serve APL, that railroad's competitor will
have had knowledge of and
access to APL's rates.

(4) Section 2.2(c), APL claims, does not provide sufficient protections to
APL in a contractual
setting in which its principal competitor will become an essential service
provider. Conrail, APL notes,
does not have a major conflict of interest in supporting APL; and, in drafting
the contract with Conrail,
much was left unsaid, because there was no need to spell out every detail that
APL expected Conrail to
attend to. APL insists that, because CSX and APL are competitors, APL will not
be competitive if it
must work with CSX under the contract terms that APL negotiated with a
noncompeting Conrail. APL
contends that, if it is to remain competitive, it will need to define the
standards of performance and
remedies for noncompliance much more precisely with CSX than it did with
Conrail.

(5) Section 2.2(c), APL claims, creates a disincentive for either railroad
to handle APL's traffic
between "dual points." APL contends: that, as respects the allocation of
contract traffic where both CSX
and NS can serve both the origin and destination, section 2.2(c) provides that
revenues and expenses
pertinent to such traffic will be divided on a 50/50 basis; that, therefore, no
matter which railroad handles
APL's traffic between Chicago and APINY, the railroad handling the traffic will
receive only 50% of the
revenues and the railroad not handling the traffic will also receive 50% of the
revenues; that,
accordingly, neither railroad will have any real incentive to handle the
traffic; and that, for essentially the
same reason, each railroad will have an incentive not to handle the traffic
because the railroad not
handling the traffic will also receive 50% of the revenue. See APL-18,
Volume 1 at 34-36.

(6) APL fears that implementation of the CSX/NS/CR transaction may be
accompanied by
service failures throughout the Conrail system, particularly in the
New York-New Jersey area and in
Chicago and particularly as respects intermodal traffic. APL also warns:
that, because CSX will be able
to set, on its lines, its own priorities for handling trains through congested
areas, the delays that will be
experienced by APL stacktrains will not necessarily be experienced by CSXI
stacktrains; and that
section 2.2(c), by requiring APL to accept the allocation to CSX of at
least a portion of APL's Conrail
service, will deprive APL of the flexibility to adjust to changing
circumstances.

New Contracts Required. APL contends that, if it is to compete
effectively in the markets in
which CSX and APL are competitors, it must be freed from the restraints
contained in section 2.2(c).
New contracts, APL argues, will be required: as to CSX (which is APL's
competitor), to provide
adequate safeguards for APL; and as to NS (which is not APL's competitor), to
reflect precisely what NS
will do and how that will be integrated into the existing services NS now
provides for APL.

Request #1. APL asks that section 2.2(c) be disapproved in its
entirety, and asks, in the
alternative: that the application of section 2.2(c) to contracts providing for
intermodal and container
services be disapproved; and, at the very least, that the application of
section 2.2(c) to APL's Conrail
contract be disapproved. The public interest, APL contends, would best be
served: by requiring CSX
and NS to negotiate separately with APL the partition of APL's Conrail
contract, on terms and conditions
no less favorable than those that APL currently has with Conrail; and,
generally, by requiring CSX and
NS to negotiate separately, with other purchasers of rail intermodal service,
the partition of their Conrail
contract(s), on terms and conditions no less favorable than those that such
other purchasers currently
have with Conrail.(470)

Request #1a. APL contends that there must be support track at
South Kearny for APINY for the
railroad that serves APL under its Conrail contract. APL suggests that, if
applicants fail to agree on such
support track, we should require that such track at South Kearny be
reserved for whichever railroad
serves APL under its Conrail contract. APL adds that, if both CSX and NS
provide such service, support
track at South Kearny must be reserved for both CSX and NS. See
APL-8, V.S. Baumhefner at 6.

Request #2. CSX and NS have sought a declaratory order, or a
declaration having the effect
thereof, that, by virtue of 49 U.S.C. 11321(a), CSX and NS will have the
same authority to use Conrail's
Existing Transportation Contracts that Conrail itself would have had. APL
asks: that we not issue the
sought declaratory order or a declaration having the effect thereof; that we
say nothing that might suggest
that our approval of the CSX/NS/CR transaction has had the effect of overriding
provisions of Conrail's
Existing Transportation Contracts; and that we make clear that nothing we have
said is to be construed as
approving any curtailment of the rights of parties which have current
transportation contracts with
Conrail. APL's interests as respects Request #2 are focused upon two
provisions in its Conrail contract:
the anti-assignment provision, which provides (subject to an exception not
presently relevant) that no
party to such contract "may assign this Agreement, in whole or in part, or any
rights granted herein, or
delegate to another party any of the duties hereunder," without the prior
consent of the other party, see
APL-18, Volume 1 at 36 n.57;(471) and the
inequities provision, which requires negotiations respecting any
gross inequities resulting from a substantial change in circumstances or
conditions, see APL-18, Volume
1 at 34.(472)

APL advances several arguments in support of Request #2. (1) APL argues:
that contracts
authorized by 49 U.S.C. 10709 or by old 49 U.S.C. 10713 are "not
subject" to 49 U.S.C. 11321(a), and
that, for this reason, the preemption power of 49 U.S.C. 11321(a)
does not reach such contracts and we
have no jurisdiction to modify such contracts.(473) (2) APL argues: that APL's Conrail
contract is for
intermodal traffic; that intermodal traffic has long been "deregulated" (i.e.,
exempted from regulation);
that 49 U.S.C. 10502 provides, in essence, that, as long as an exemption
remains in effect, we cannot
regulate a matter that has been deregulated; and that, accordingly, we cannot
"regulate" APL's Conrail
contract by overriding a provision contained therein. (3) APL argues that an
override of the provisions
contained in its contract is not "necessary" to the CSX/NS/CR transaction. APL
notes that, if its contract
(and any similar contract) were allowed to remain in effect, the only
consequence would be that CSX and
NS would have to negotiate separately with APL (and with any holder of a
similar contract) respecting
APL's (and any such other contract holder's) rail service needs.(474)

Request #2a. As respects the portion of the services provided
under APL's Conrail contract that
may be assigned to CSX, APL claims that there is an "excellent possibility that
CSXI will administer the
APL-Conrail Contract for CSXT." APL contends that, even if we override the
anti-assignment provision
in its contract, we should not allow applicants to assign that contract beyond
CSXT or NSR. It would be
"truly bizarre," APL argues, to allow its contract with Conrail to be assigned
to a non-railroad that is, in
this proceeding, a nonapplicant. See APL-18, Volume 1 at 25 n.41.

Request #3. APL asks that we retain jurisdiction over the
CSX/NS/CR transaction and conduct
quarterly oversight thereof until December 31, 2004.

Request #4. APL asks that we prohibit CSX and NS from
discriminating, either in schedules,
terminal services, space allocations, equipment allocations, or otherwise, in
favor of affiliated container
transportation providers (such as Sea-Land) or affiliated stacktrain operators
(such as CSXI) to the
detriment of independent, non-affiliated container service providers or
stacktrain operators.

CARGILL. Cargill, which merchandises agricultural
commodities, supports the CSX/NS/CR
transaction but suggests that we should consider certain modifications intended
to facilitate
implementation. (1) Cargill asks that the relevant labor organizations be
required to participate in the
negotiation and arbitration process for obtaining labor implementing
agreements, to assure that such
agreements are in place on or shortly after the effective date of a Board
decision approving the
transaction. (2) Cargill contends that, to ensure a smooth transition, there
should be a period of time,
after the Board's approval decision is served, for CSX's and NS' management to
complete the design of
plans to achieve effective day-to-day operation of both systems after the
breakup of Conrail.

DeKALB AGRA. DeKalb Agra, a cooperative based in
Waterloo, IN, receives inbound rail
shipments of fertilizer and potash, and relies heavily on rail to market whole
grain to the eastern
domestic and export markets and to poultry and feed mills in the Southeastern
United States. DeKalb
Agra, which is apparently rail-served exclusively by Conrail on a line that
will be assigned to NS, claims
that, although service has deteriorated in recent years and shipper costs have
increased, it has nonetheless
been able to sell grain to the river markets and/or to the southeastern poultry
producers via Conrail/CSX
and Conrail/NS joint-line routings. DeKalb Agra, which fears that,
post-transaction, it will be able to
market its grain only to NS destinations, asks that we take a pro-active stance
in reviewing the impact of
the CSX/NS/CR transaction on switch rates and service levels. DeKalb Agra
contends that, where
necessary, joint-line rates must be prescribed to guarantee access to river
markets.

FORT ORANGE PAPER COMPANY. FOPC, which manufactures
clay-coated recycled box
board, indicates: that its plant is located on a Conrail line at
Castleton-on-Hudson, NY (on the east side
of the Hudson River, a few miles south of Rensselaer, NY); that its raw
materials (kaolin clay and scrap
paper) move inbound via truck and rail; that its finished products move
outbound via truck; that it
currently receives, via Conrail, fewer than 50 carloads of raw materials
every year, primarily from
origins in the Deep South and central Pennsylvania; that, prior to 1994, it
typically received
approximately 50 to 100 carloads of inbound product by rail per year; that,
however, it had to divert
much of this traffic to truck when Conrail imposed a $350 per car light density
surcharge plus a 20%
increase in the base rate of FOPC's inbound traffic;(475) that, however, FOPC still relies on inbound
rail
freight to the extent that truck transportation is unavailable or unacceptable;
that, for all practical
purposes, Conrail presently has an effective monopoly over that portion of
FOPC's inbound freight that
must move by rail; and that FOPC has been constrained in its ability to reach
other sources of raw
materials and markets for its products (especially Canadian sources and
markets) on account of its lack
of cost-effective access to CP.

FOPC has four principal concerns with the CSX/NS/CR transaction. (1) FOPC
claims that the
CSX/NS/CR transaction, which contemplates the assignment of Conrail's lines
east of the Hudson River
to CSX, does not offer to points east of the Hudson the economic benefits it
offers to points west of the
Hudson. (2) FOPC, which has some SL-to-JL traffic, fears that the new
post-transaction NS/CSX
interchange will delay shipments, will create opportunities for loss and damage
of product, and will
result in increased rates. (3) FOPC, which has some traffic that Conrail
has traditionally interlined with
either CSX or NS, fears that CSX and NS may not cooperate to interline traffic
in a way that best serves
FOPC's interests. Conrail, FOPC contends, has traditionally functioned as a
neutral connection for CSX
and NS; but CSX, FOPC fears, will not function as a neutral connection for NS.
(4) FOPC fears that
CSX, much like Conrail, will view the Hudson Division (which lies east of the
Hudson) as the "poor
sibling" of the River Division (which lies west of the Hudson).

FOPC therefore asks that we make available to FOPC the competitive rail
service that shippers
located west of the Hudson can expect to receive.(476) (1) FOPC would prefer: that we grant, to
NYDOT
or its designee, local service trackage rights between Rensselaer and New York
City via Castleton; and
that we assign to the grantee of these rights a common carrier obligation to
provide local service on
customer request. (2) FOPC suggests that, if we do not grant NYDOT the
trackage rights it seeks, we
should order CSX: (a) to maintain or establish routes and rates through
gateways at Albany and New
York City to allow interchange of freight with CP at Albany (for movement to NS
at Harrisburg) and
with NYCH in New York City (for movement to NS at Greenville, NJ); (b) to
fix rates at their current
level (subject to normal industry-wide rate increases or decreases); and (c) to
cancel the light density
surcharge imposed by Conrail in 1995.

GENERAL MILLS. General Mills' operations in Buffalo, NY,
include a flour mill, a grain
elevator, a cereal plant, and several warehousing operations, all presently
located on Conrail (on a line
that will be assigned to CSX). General Mills contends: that, prior to the
establishment by Conrail of the
current reciprocal switching charges, over 90% of General Mills' inbound
traffic into Buffalo was
shipped via other carriers (principally NS), General Mills' Buffalo mill was
run at capacity, and Buffalo
was a distribution center for packaged products for customers throughout the
Northeast; that the
establishment by Conrail of the current reciprocal switching charges
(approximately $450) effectively
shut down the Buffalo/Niagara Frontier rail gateway, and forced shippers to
tender all traffic to Conrail
at Chicago or East St. Louis; that, since the establishment by Conrail of the
current reciprocal switching
charges, virtually 99% of inbound traffic to General Mills' Buffalo facilities
has had to come via Conrail;
and that, on account of the current reciprocal switching charges, General
Mills' Buffalo mill is not
currently running at capacity, General Mills' distribution operations for the
Northeast have been
consolidated in the Harrisburg, PA, area, and much outbound traffic that
formerly moved by rail now
moves by truck. General Mills argues that the current high Conrail switch
charge, which (General Mills
claims) CSX has indicated will remain in effect for the Buffalo/Niagara
Frontier area, will preclude
General Mills from using other railroads either into or out of Buffalo.

General Mills therefore asks that we impose four conditions. (1) General
Mills contends that, to
create competitive options for shippers in Western New York, the
reciprocal switch charge in the
Buffalo/Niagara Frontier area should be reduced to a uniform $130 per car. (2)
General Mills, which
fears that the acquisition debt that CSX and NS have taken on will make both
carriers revenue
inadequate, contends that CSX and NS should be prevented from factoring
acquisition costs into
ratemaking calculations for a period of 5 years. (3) General Mills contends
that CSX and NS should be
required to protect current Conrail single-factor local rates that
post-transaction will become two-factor
joint rates for 5 years, subject to RCAF-U adjustments. General Mills adds
that this condition is
intended to include the full switch absorption at either destination or origin
if applicable. (4) General
Mills contends that CSX and NS should be required to amend the current Buffalo
switching district to
include a new industrial park located in West Seneca, NY. General Mills claims
that inclusion within the
switch limits of this new park, which lies a mere hundred yards from the
current limits of the switch
district, will allow new industries and warehouses in this park to enjoy
competitive rail service.

INLAND STEEL COMPANY. ISC, which operates a steel
production plant at East Chicago,
IN, and two related facilities (a cold-rolling mill and a galvanizing
plant) near New Carlisle, IN,
contends: that it is dependent on rail transportation for its inbound raw
materials, for its coal and coke
requirements, for the distribution of its finished steel products, and for the
transfer of steel inventories
between the East Chicago plant and the New Carlisle facilities; that its
East Chicago plant is served by
two railroads, the IHB and the EJ&E, each of which serves as a switch
carrier, connects to all major
trunklines in the Chicago area, and handles significant volumes of traffic
moving from/to the East
Chicago plant; that the New Carlisle facilities are served by Conrail;
that Conrail transports over 95% of
the work-in-progress inventories moving between the East Chicago plant and
the New Carlisle facilities;
that IHB is the delivering or originating carrier for all work-in-progress
inventories moved via Conrail
between the East Chicago plant and the New Carlisle facilities; and that
IHB is of critical importance to
ISC's operations at East Chicago and New Carlisle.

ISC's interests in this proceeding are focused upon its rail options at its
East Chicago plant,
which (ISC claims) might be adversely affected either by unconditioned approval
of the CSX/NS/CR
primary application or by unconditioned approval of the EJ&E/I&M
responsive application.(477)

The CSX/NS/CR Primary Application. ISC claims that applicants'
post-transaction plans vis-à-vis IHB raise serious concerns about IHB's
post-transaction ability to operate independently and to
provide reliable service to its shippers. ISC thereforef asks that we require
that NS be granted trackage
rights to directly service ISC's East Chicago plant, at fee levels that will
allow NS to compete effectively
for traffic moving from/to that plant.

The EJ&E/I&M Responsive Application. ISC claims that the
EJ&E vs. IHB competition that
presently exists for traffic moving from/to ISC's East Chicago plant would be
eliminated if EJ&E and
I&M were to acquire Conrail's 51% IHB ownership interest. ISC therefore
contends that, to preserve the
rail competition ISC now enjoys, we should deny the EJ&E/I&M responsive
application. ISC further
contends, but only in the alternative, that, if we decide to grant the
EJ&E/I&M responsive application,
we should require a grant to NS of trackage rights over the rail lines of IHB
that access ISC's East
Chicago plant. ISC argues that a grant of trackage rights to NS, although not
its preferred solution,
would at least preserve two-carrier rail competition (NS vs. EJ&E/IHB)
at ISC's East Chicago plant.

INTERNATIONAL PAPER COMPANY. IP's interests in this
proceeding are focused on
traffic that now moves in Conrail single-line unit train service between: (i)
an IP mill in Erie, PA; and
(ii) an IP mill at Lock Haven, PA. The Conrail route consists of three
segments: (1) a Conrail line,
roughly 3 miles in length, between IP's Erie mill and Conrail's OD Yard in
Erie; (2) an Allegheny &
Eastern Railroad, Inc. (ALY) line, roughly 150 miles in length, between
OD Yard and Emporium, PA,
over which Conrail has trackage rights; and (3) a Conrail line, roughly
75 miles in length, between
Emporium and IP's Lock Haven mill.(478) IP
contends: that it uses a combination of its own cars and
Conrail's cars to transport freight between its Erie mill and its
Lock Haven mill; that it uses
approximately 330 specialized log and gondola cars of its own; and that it
uses Conrail's box cars only as
necessary to carry rolled or baled pulp. IP further contends: that the IP
unit train departs the Erie mill
comprised of gondolas and box cars loaded with wood pulp, and empty log cars to
be dropped off at
wood yards along the way; that, when the loaded cars arrive at Lock Haven, the
wood pulp is unloaded;
that the gondola and box cars return empty to Erie; that, on the return trip
from Lock Haven to Erie,
loaded log cars are picked up at wood yards along the way; and that, once the
cars have been returned to
Erie, the logs are unloaded, and wood pulp is loaded for the next trip to
Lock Haven.

The CSX/NS/CR transaction contemplates: that the Conrail line between the
Erie mill and OD
Yard will be assigned to CSX; that Conrail's trackage rights over the ALY line
between OD Yard and
Emporium will be assigned to NS; and that the Conrail line between Emporium and
Lock Haven will
also be assigned to NS. IP warns that the conversion to joint-line service:
will likely jeopardize the
entire Erie-to-Lock Haven arrangement, given the increased costs and
decreased efficiencies inherent in
joint-line service; and, in consequence, will likely jeopardize the continuing
economic viability both of
the Erie mill and of the Lock Haven mill. IP contends that the
substantial harm to the local economy that
will result from the loss of single-line service establishes that such service
is "essential" as that term is
used in our regulations. And, IP adds, section II(C) of the NITL agreement
will not ameliorate the
problems it will face post-transaction, because that provision does not address
situations in which a
shipper is losing single-line service. See IP-5 at 13.(479)

IP therefore asks that we impose either of two conditions upon any approval
of the CSX/NS/CR
transaction. Condition #1, which would allow for the creation of NS
single-line service in lieu of the
pre-transaction Conrail single-line service, would require CSX to grant NS
trackage rights over the
Conrail line between the Erie mill and OD Yard. Condition #2, which would
allow for the creation of
ALY single-line service in lieu of the pre-transaction Conrail single-line
service: would require CSX to
grant ALY trackage rights over the Conrail line between the Erie mill and OD
Yard; and would require
NS to grant ALY trackage rights over the Conrail line between Emporium and the
Lock Haven mill. IP
adds that the trackage rights granted under either condition could be
restricted to the transportation of
IP's dedicated cars between its Erie and Lock Haven mills.

J.B. HUNT TRANSPORT. Hunt, a truckload motor carrier
which currently has in place a
contract with Conrail pursuant to which Hunt moved 130,000 containers in 1996,
is concerned whether,
and to what extent, its Conrail contract will be operated by CSX and/or NS
post-transaction. Hunt,
which claims to have made, in connection with this contract, substantial
investments, contends that no
provision has been made by either CSX or NS to assume Hunt's Conrail contract
or to continue services
with Hunt under similar terms and conditions. Shippers, Hunt warns, have come
to rely upon the
services provided by Hunt, and any disruption of these services would have an
adverse impact on the
development of intermodal transportation and on highway congestion in the
heavily populated
Northeastern Corridor. Hunt therefore asks that we weigh the effect of the
proposed transaction on the
existing truck/rail services rendered by Conrail and require CSX and NS to
provide intermodal
transportation services in conjunction with Hunt and other motor carriers under
terms and conditions no
less favorable than the terms and conditions contained in Conrail's current
contracts.

JOSEPH SMITH & SONS. Although JS&S's Capital
Heights, MD, scrap metal processing
facility is bounded on three sides by rail lines (Amtrak's NEC to the north; a
CSX line to the east and
south; and a Conrail line to the south), service can presently be provided only
by Conrail (because the
JS&S industry track connects only with the Conrail line). JS&S
insists, however, that its present ability
to build out to the CSX line establishes the potential for rail vs. rail
competition. JS&S adds that, from a
physical perspective, an Amtrak build-out would also be feasible, although
JS&S admits that, as a
practical matter, its ability to build out to the Amtrak line would not
establish rail vs. rail competition
(because the carrier that presently provides freight service on the Amtrak line
is Conrail). JS&S, which
insists that there is only limited intermodal competition for its traffic, asks
that we preserve the two
build-out options that exist at its Capital Heights facility today.

JS&S's Requests. (1) JS&S notes that, because the
CSX/NS/CR transaction contemplates the
assignment of the Conrail line to CSX, JS&S's pre-transaction CSX build-out
option will not exist
post-transaction. JS&S claims, however, that NS will receive, as part of
the CSX/NS/CR transaction,
trackage rights over the CSX line. JS&S therefore asks that we preserve
its CSX build-out option by
permitting NS to build-in to serve JS&S, or JS&S to build-out to reach
NS, at any point along the
existing CSX line that borders the JS&S property. (2) JS&S, though it
notes that the CSX/NS/CR
transaction contemplates the assignment to NS of Conrail's trackage rights on
that portion of the Amtrak
line that runs next to JS&S's facility, contends that there is uncertainty
whether JS&S will be able to be
served by NS via those trackage rights in the same manner that JS&S could
be served by Conrail today.
JS&S therefore seeks clarification that it will have the same opportunity
to connect to the Amtrak line
that it has today, and that NS will have the right and a common carrier
obligation to serve JS&S via that
connection.

Applicants' Rebuttal (filed December 15, 1997). Applicants
contend that JS&S will not suffer
competitive harm as a result of the CSX/NS/CR transaction. (1) Applicants
claim that JS&S has
neglected to mention that it currently enjoys service from a second carrier
(CSX, via a Conrail switch).
Applicants add: that, post-transaction, CSX will operate the current Conrail
line that directly serves
JS&S; that NS will have trackage rights over this line;(480) that CSX has agreed to switch for NS;(481) that
JS&S will therefore continue to have direct access to two railroads; and
that, accordingly, the NS build-out requested by JS&S will not be
necessary. (2) Applicants claim that the CSX/NS/CR transaction will
not affect JS&S's rights as respects a build-out to the Amtrak line. NS,
applicants insist, will receive
Conrail's rights over that line, and will have the same operating rights
Conrail now has over this stretch
of Amtrak's NEC. Applicants add that, in any event, JS&S will not need to
reach NS on the Amtrak line
because NS will be accessible (via a switch) from the CSX line (i.e., the
Conrail line) over which NS will
have trackage rights.

JS&S's Brief (filed February 23, 1998). (1) JS&S insists
that the reciprocal switching
arrangement cited by applicants will not preserve JS&S's pre-transaction
competitive position.
Reciprocal switching, JS&S notes, is not equivalent to direct rail access;
a location can be closed to
reciprocal switching at any time and/or the switching rates can be increased;
and the NITL agreement
only obligates CSX to provide reciprocal switching at a designated rate for 5
years. A build-in option,
JS&S adds, will last as long as the build-in carrier operates over a nearby
line.(482) (2) JS&S agrees that
NS will inherit the same operating rights on the relevant stretch of Amtrak's
NEC that Conrail has today,
and that, therefore, NS will have the same right Conrail now has to serve
JS&S via a connection to the
NEC. JS&S adds, however, that, to avoid a future dispute, it seeks
clarification of this matter in the form
of a condition.

JSTAR CONSOLIDATED. JStar, a rail logistic services
provider that operates a facility at
Conrail's Stanley Yard in Toledo, OH, serves rail shippers that route traffic
from/to its facility. Conrail
is the only railroad to which JStar has direct access, but JStar contends that
Conrail plays, at Toledo, the
role of a neutral switching carrier, and JStar fears that CSX (Conrail's
successor as respects JStar)(483) will
not be a neutral switching carrier; CSX, JStar warns, will favor its own
routings. And, JStar adds, it will
also be adversely impacted by the existence of the nearby SAA in Detroit.
JStar insists that, to preserve
the competitive status quo, it must have access to NS. JStar therefore
suggests that we require either:
(1) that NS be given trackage rights within the Stanley Yard area, between
the NS portions of the yard
and the JStar facility; or (2) that CSX provide a competitive access switch for
NS at no extra cost,
handling NS linehaul traffic within Stanley Yard to the JStar facility; or (3)
that JStar be given trackage
rights through the CSX portion of the yard to a connection with NS.

NATIONAL LIME AND STONE COMPANY. NL&S, which operates
in Ohio, nine quarry
and stone processing locations as well as four rail distribution yards and two
truck distribution yards, and
which, for many years, has shipped limestone and limestone products on CSX, NS,
Conrail, and W&LE,
indicates that its interests in this proceeding are focused on its Bucyrus and
Carey quarries. NL&S
claims that, at Bucyrus, rail service can be provided only by Conrail, which
can provide single-line hauls
to several key destinations east of Crestline (one such destination is
NL&S's sales yard at Wooster).
NL&S further claims: that, at Carey, rail service can be provided by
Conrail, CSX, and W&LE; that
Conrail can provide single-line hauls to several key destinations east of
Crestline; that CSX can provide
single-line hauls to several key destinations; and that W&LE can provide
single-line hauls to a few key
destinations. NL&S contends that, because the CSX/NS/CR transaction
envisions the allocation of
NL&S's Carey and Bucyrus plants to a territory controlled by CSX and the
allocation of NL&S's
Wooster sales yard to a territory controlled by NS, NL&S will be adversely
impacted in two respects.
(1) NL&S contends that the CSX/NS/CR transaction will significantly
degrade the adequacy of the
single-line Conrail routings that will hereafter be joint-line CSX/NS
routings. NL&S claims that this SL-to-JL effect will result in increased
transportation costs to NL&S, will make rail cars more difficult to
source, and will make service slower and less reliable. NL&S adds that the
CSX/NS/CR transaction, if it
has the effect of putting W&LE out of business, will also deprive NL&S
of single-line service to the
markets to which W&LE now provides such service. (2) NL&S contends
that, at Carey, it will lose
access to competing suppliers of rail transportation. NL&S claims that its
status at Carey will be at least
3-to-2 (when the Conrail lines are assigned to CSX) and may ultimately be
3-to-1 (if the CSX/NS/CR
transaction has the effect of putting W&LE out of business).

NL&S claims that it will have no way to escape the adverse impacts it
fears. (a) NL&S
concedes, in essence, that it ships a significant quantity of its product by
truck, but insists that the
characteristics of aggregates and crushed rock are such that, beyond very short
distances, truck transport
is not a viable option. And, NL&S adds, because neither Carey nor Bucyrus
is located near a water
transport route, barge shipping is not available either. (b) NL&S concedes
that applicants have agreed to
honor NL&S's existing contracts with Conrail. NL&S insists, however,
that, in the relatively little time
these contracts have left to run, NL&S will be unable to recoup the
investments it has made at Bucyrus
and Wooster. And, NL&S adds, even if applicants honor the Conrail
contracts, the CSX/NS joint-line
service that NL&S will receive will necessarily be less reliable and lower
in quality than the single-line
service heretofore provided by Conrail. (c) NL&S concedes that the rates
on its SL-to-JL traffic will be
covered, for 3 years, by section III(E) of the NITL agreement. NL&S
insists, however, that the 3 years
of protection provided by section III(E) is not enough time to protect the
facility investments that NL&S
made on the premise of continued access to single-line rail service. Nor,
NL&S adds, will section III(E)
protect NL&S against the service degradation that will accompany the
conversion to joint-line service.
(d) NL&S concedes, in essence, that the new CSX single-line service it
will have at Bucyrus may open
up new opportunities. NL&S contends, however: that any such benefit is
entirely speculative; and that,
in any event, post-transaction CSX single-line service (unlike pre-transaction
Conrail single-line service)
will not allow NL&S to coordinate the operations of its Bucyrus/Carey
plants and its Wooster sales yard.

NL&S therefore contends: that the CSX/NS/CR transaction should be
denied; and that, if the
transaction is to be approved, appropriate conditions must be imposed to
protect NL&S against a loss of
the "essential service" now provided by Conrail (i.e., single-line service
between Carey and Bucyrus, on
the one hand, and, on the other, NL&S's eastern markets).(484) NL&S seeks four conditions: (1) a
condition that would require CSX to grant NS trackage rights from Crestline to
Spore (the site of
NL&S's Bucyrus plant); (2) a condition that would require CSX to grant NS
trackage rights from Upper
Sandusky to NL&S's Carey plant;(485) (3) a
condition that would require NS to grant CSX reciprocal
trackage rights to enable CSX to provide single-line service to NL&S's
existing and future markets east
of Crestline; and (4) a condition that would apply if control over W&LE or
its facilities were to change
as a result of the CSX/NS/CR transaction, and that would require that a
railroad other than W&LE's
successor be granted trackage rights over W&LE's tracks to NL&S's
markets now served by W&LE.

NYNJFFF&BA. The New York/New Jersey Foreign Freight
Forwarders & Brokers
Association (NYNJFFF&BA), which represents ocean freight forwarders and
non-vessel operating
common carriers in the New York/New Jersey port area, notes that the
efficient operation of the rail lines
and rail terminals in that area is of vital importance to its members.
NYNJFFF&BA warns that, if the
CSX/NS/CR transaction is not implemented efficiently in the New York/New
Jersey port area, many
problems are likely to develop, including congested rail lines, bottlenecking
at rail terminals, lengthy
delays, untimely deliveries, and equipment shortages. It is critical,
NYNJFFF&BA contends, that
shippers, carriers, and transportation intermediaries understand, prior to
approval of the CSX/NS/CR
application, the type of market access and operating infrastructure that will
be available to meet current
needs and projected growth. NYNJFFF&BA therefore asks that we require CSX
and NS to provide more
detailed information respecting their plans for the management of and
operations within the
New York/New Jersey port area, and particularly within the North
Jersey SAA.(486)

PRAIRIE GROUP. Prairie Group, a construction materials
company based in Bridgeview, IL,
owns seven brick distribution subsidiaries. Six of the seven are served by
rail; of the six served by rail,
five are located in the Chicago switching district; and, of the five located in
the Chicago switching
district, two are served by IHB. Prairie Group supports the CSX/NS/CR
transaction but is concerned
about problems that may arise in the wake of the change in control of IHB.
Prairie Group mentions two
such problems: (1) Prairie Group is concerned about the competitive problem
that may arise from CSX's
control of IHB (the danger here reflects the fact that at least some of Prairie
Group's brick distribution
subsidiaries are served by NS); and (2) Prairie Group is concerned about
the operational problem that
may arise from CSX's control of IHB (the danger here is that CSX will use IHB
to accommodate line-haul traffic moving through Chicago, and will have less
interest in using IHB to provide quality
switching service to traffic that either originates or terminates in Chicago).

The focus of Prairie Group's concern is the operational problem. Prairie
Group claims that, in
the wake of the recent western rail mergers: increasing numbers of overhead
trains moving through
Chicago have been routed via IHB, which has made the Class I railroads IHB's
largest customers; the
handling of these trains has been given priority over serving customers
actually located in the IHB
corridor; the switching service provided by IHB to the two Prairie Group
subsidiaries served by IHB has
deteriorated; and shipments on IHB have incurred significant delays. Prairie
Group insists that the
inability of its brick companies to receive brick on a timely basis has
negatively impacted Prairie Group's
competitive position vis-à-vis other brick distribution companies in the
Midwest.

The Chicago switching district, Prairie Group contends, is an extremely
congested area, and
efficient switching services accessible to everyone on an equal basis are vital
to the movement of the
traffic of Prairie Group and other similarly situated companies in the IHB
corridor. Prairie Group
contends, in essence, that the existing situation as respects IHB is not good,
and that it is likely to get
worse (because CSX will continue to focus IHB's operations on overhead trains
moving through
Chicago). Prairie Group, which believes that IHB should be managed and
operated as a neutral
switching carrier devoted to serving its on-line customers and all carriers
entering Chicago equally,
therefore supports the EJ&E/I&M responsive application.(487)

RESOURCES WAREHOUSING & CONSOLIDATION SERVICES. RWCS,
a freight
forwarder with facilities located on an NYS&W line in North Bergen,
NJ,(488) supports the CSX/NS/CR
transaction but has requested equal access to CSX and NS rail service from/to
its facilities. Applicants
have indicated, in rebuttal, that RWCS, which can only be served now by
NYS&W and which will only
be served post-transaction by NYS&W, will be provided the dual access it
seeks. "It will be able to
connect to NS via Passaic Junction off the Southern Tier on the Conrail lines
allocated to NS; and to
CSX via a connection to be built from North Bergen to Little Ferry."
See CSX/NS-176 at 167-68.(489)
RWCS has indicated, on brief, that, although it accepts applicants' statement
that it will be provided the
dual access it seeks, it is concerned that CSX and NS, which "have in fact
purchased NYS&W and are
the co-owners," RWCS-4 at 4,(490) may
discriminate in favor of their own facilities within the North Jersey
SAA. RWCS has therefore requested the imposition of a condition to ensure (a)
that the interconnect is
built to allow access to CSX at North Bergen/Little Ferry, and (b) that
neither CSX nor NS acts to restrict
the opportunity for equal or dual access.(491)

REDLAND OHIO. Redland ships lime, limestone, and
aggregate products from its quarry and
processing sites at Woodville and Millersville, OH (and also receives inbound
shipments of coal at its
Woodville facility). Redland indicates: that its Woodville facility is served
directly by Conrail and
indirectly (via a shortline connection) by NS and CSX;(492) that its Millersville facility is served
indirectly
(via a shortline connection) by Conrail, NS, and CSX;(493) and that the vast majority of Redland's rail
shipments are presently shipped either via Conrail or via CSX. Redland
contends that the traffic
realignments occasioned by the CSX/NS/CR transaction will have a variety of
impacts as respects
Redland's traffic.(494) In some cases,
Redland notes, there may be new single-line routing options; in other
cases, existing single-line routing options will be lost; and, in still other
cases, the old single-line routing
options may continue to exist but may prove to be less desirable than certain
new single-line routing
options. And, Redland adds: Redland will be losing the one rail carrier
(Conrail) that has provided the
best rates and the most reliable service; and NS, which is now a minor
participant in the movement of
Redland's traffic, will be better positioned to compete for a greater share of
Redland's business. The
bottom line, however, is that Redland has doubts about the level of service
that CSX and NS will be able
to provide once the CSX/NS/CR transaction has been implemented. Redland is
also concerned about the
future of Ohio's largest regional carrier, the W&LE.

Redland initially asked that we deny the CSX/NS/CR application, or,
alternatively, that we
impose three conditions upon any approval thereof. See Redland-2 at 5
(filed October 21, 1997).
Redland, however, has since withdrawn both its opposition to the transaction
and also its request that we
impose its Conditions #1 and #2. Redland now states that it is prepared
to allow CSX and NS to prove
themselves. Redland adds, however, that it "reserves the right" to return to
the Board to seek protective
relief and monetary damages in the event that CSX, once it assumes operation of
the Conrail line into
Woodville, subjects Redland's traffic to avoidable operating inefficiencies or
similar abuses. Redland
continues to request that we impose Condition #3, which would require
applicants to provide to W&LE,
upon reasonable terms and conditions, either trackage or haulage rights over an
existing NS line from
Bellevue, OH, to the NO&W interchange at Maple Grove, OH. Redland seeks
Condition #3 both for
W&LE's sake (Redland claims that the revenue potential for W&LE at
Maple Grove would help to keep
W&LE solvent) and for Redland's sake (Redland indicates that a W&LE
routing would provide Redland
with access to customers that Redland cannot reach today). Redland may also be
requesting that we
affirm any anti-assignment clauses contained in any applicable Conrail
contract. See Redland-2 at 11-12.

TRANSPORTATION INTERMEDIARIES ASSOCIATION. TIA, which
represents
transportation intermediaries providing services as property brokers, freight
forwarders, consolidators,
intermodal marketing companies, non-vessel operating common carriers, ocean and
air forwarders, and
logistics companies, warns that its members, and the small to mid-range
businesses they serve, will
suffer negative impacts if CSX and NS raise their contract volume requirements,
eliminate existing
service lanes and intermodal terminals, impose more stringent credit terms,
and/or increase rates. TIA
has therefore asked us to impose three conditions upon any approval of the
CSX/NS/CR transaction.
(1) TIA asks that CSX and NS, and Conrail where applicable, be prohibited
from imposing liquidated
damages for volume shortfalls due to: increases in a carrier's rates which
materially reduce the
competitiveness and marketability of its service; termination of railroad
service lanes and/or intermodal
terminals when no other competitive rail service alternative exists; service
performance which materially
deviates from published service schedules; carrier service schedules which
materially increase service
transit times; and increased frequency and/or severity of cargo loss or damage
by the railroad. (2) TIA
asks that CSX and NS, and Conrail where applicable, be required to submit plans
demonstrating
competitive intermodal linehaul service in all lanes currently serviced by
Conrail. (3) TIA asks that CSX
and NS, and Conrail where applicable, be required to submit plans: showing how
they plan to allocate
intermodal containers and trailers; and showing continued interchange of
intermodal railcars, containers,
and trailers with all other railroads.

WYANDOT DOLOMITE. Wyandot, which claims that most of the
aggregate and limestone it
produces at Carey in Northwestern Ohio is shipped by rail to points in Eastern
Ohio, contends: that it
now has access to CSX, Conrail, and W&LE;(495) that W&LE handles most of Wyandot's
rail freight; and
that Conrail, the only carrier that can provide single-line service to
Alliance, OH, handles the
approximately 20% of Wyandot's annual stone sales that move to East Ohio Stone
Co. in Alliance.
Wyandot's interests in this proceeding are focused upon its Carey-to-Alliance
traffic, which, though it
now moves in Conrail single-line service, will henceforth move, if at all, in
CSX/NS joint-line service,
given that the CSX/NS/CR transaction envisions the assignment to CSX of
Conrail's Carey-Upper Sandusky trackage rights(496) and the Conrail line between
Upper Sandusky and Crestline, and the
assignment to NS of the Conrail line between Crestline and Alliance. Wyandot
contends that, with two
Class I carriers in the move, Carey-to-Alliance rates will rise and
service will decline, and, in
consequence, Wyandot will almost certainly lose East Ohio Stone's
business. Wyandot insists that the
new inefficiencies and likely increased costs Wyandot and East Ohio Stone will
bear if the CSX/NS/CR
transaction is approved without appropriate conditions constitute harm to the
public interest warranting
relief. And, Wyandot adds: the pre-transaction Conrail Carey-to-Alliance
single-line routing is, from
Wyandot's perspective, an "essential" service (it is essential in the sense
that, without such a routing,
Wyandot's traffic, which cannot move by truck, will not move at all); and
section III(E) of the NITL
agreement (the SL-to-JL provision) fails to provide Wyandot any real assurances
concerning its
East Ohio Stone traffic.

Wyandot therefore asks that we impose four conditions. (1) Condition
#1 would require: that
the Conrail trackage rights over CSX's Carey-Upper Sandusky line be assigned to
NS; and that NS be
allowed to link these trackage rights with the generally overhead trackage
rights it is slated to receive on
Conrail's Fort Wayne-Upper Sandusky-Crestline line, see CSX/NS-25,
Volume 8B at 111 (Item 11).
And, Wyandot adds, the fees NS must pay for such trackage rights must be
structured so as to ensure that
Wyandot's shipping costs on this route are not higher than those now charged by
Conrail.(497) (2)
Condition #2 would make the Condition #1 trackage rights mandatory, and would
impose upon NS a
common carrier obligation to serve Wyandot. (3) Condition #3 would require NS
to retain in effect for 5
years a rate or rates for the movement of aggregate traffic to East Ohio Stone
at Alliance that is no higher
than that currently charged by Conrail. (4) Condition #4 would provide
that, if NS proves unwilling or
unable to provide Carey-to-Alliance service upon reasonable request, or if NS
abandons or otherwise
relinquishes its rights of access to or between Carey and Alliance, then this
proceeding will be reopened
upon Wyandot's request, and, at Wyandot's election, another rail carrier of
Wyandot's choosing will be
directed to provide Carey-to-Alliance service.(498)

APPENDIX I: REGIONAL/LOCAL INTERESTS IN THE
NORTHEAST

BUSINESS COUNCIL OF NEW YORK STATE. BCNYS conditionally
supports the
CSX/NS/CR transaction but asks: (1) that we act to ensure the viability of
shortline and regional
carriers; (2) that we ensure, to the extent possible, that the inordinately
high switching charges found in
the Port of New York and upstate population centers will be reduced to
reasonable levels; (3) that we
ensure that shortline, regional, and other Class I railroads will be allowed to
interchange with applicants'
lines and other proximate railroads in areas where they are now prohibited from
doing so; and (4) that we
allow a third carrier trackage rights from upstate New York to the New
York Metropolitan Area and the
Port of New York, especially on the east side of the Hudson.

COALITION OF NORTHEASTERN GOVERNORS. CNEG, an association
of the
governors of the nine Northeastern states (New York, New Jersey,
Pennsylvania, and the six New
England states), argues that approval of the CSX/NS/CR transaction should be
conditioned to ensure
effective rail competition throughout the Northeast.(499) CNEG claims: that, insofar as CSX and NS
propose to restore effective rail competition in the Northeast, their
initiative should be encouraged; that,
however, CSX and NS also propose to preserve the Conrail monopoly in large
parts of the Northeast,
including portions of New York, New Jersey, and Pennsylvania, and, in
particular, the areas east of the
Hudson River; and that the combination of the restoration of competition in
certain areas and the
preservation of the Conrail monopoly in other areas will have adverse impacts
in all of the areas in which
the Conrail monopoly is preserved. CNEG insists that our decision in this
proceeding must reflect the
unique history of Conrail, which (CNEG notes) was created in the public
interest as a response to the rail
crisis in the Northeast in the 1970s.

Proposed Remedy. CNEG argues that we must assure that the areas
in which CSX and NS
intend to preserve the Conrail monopoly will be afforded effective, two-carrier
rail competition. CNEG
notes that the competitive access it seeks can be accomplished in several
ways. The preferred way,
CNEG indicates, would entail the type of direct access by both CSX and NS that
is being proposed for
the SAAs. CNEG adds, however, that there are also other (though less
effective) means to promote
competition, such as trackage rights or haulage rights. CNEG indicates, in
this regard, that it would be
best if any east-of-the-Hudson trackage rights (in particular, trackage rights
between Albany and
New York City, and also between Albany and Worcester) were granted to NS.

Retained Jurisdiction. CNEG further contends that we should
retain jurisdiction to determine
whether there will be, post-transaction, effective rail competition in all
parts of the Northeast and, in
particular, in the areas east of the Hudson. The condition contemplated by
CNEG would provide for
periodic review of the competitive access issues, and would also provide the
Board with sufficient
authority to impose additional or other relief to the extent warranted. Such
additional relief, CNEG
indicates, might entail the creation of additional SAAs or the imposition of
trackage rights in favor of NS
over the CSX lines east of the Hudson River.

COMMONWEALTH OF MASSACHUSETTS. The Commonwealth of
Massachusetts
indicates that, because CSX has agreed to certain conditions which, if
implemented, will bring about
economic balance and enhance passenger/freight operational coordination, the
Commonwealth supports
the CSX/NS/CR transaction subject to the fulfillment of certain "stipulations"
agreed to by CSX. The
Commonwealth, though it has not asked us to impose as conditions the
stipulations agreed to by CSX,
has asked that we retain jurisdiction: to provide for periodic oversight of
the issues it has raised; and to
confirm the fulfillment of the stipulations agreed to by CSX within a
reasonable time frame (i.e., not less
than 3 years nor more than 5 years after the effective date of approval).

CONNECTICUT DEPARTMENT OF TRANSPORTATION. CTDOT argues
that the
CSX/NS/CR transaction, by preserving the Conrail monopoly east of the Hudson
while creating
competition west of the Hudson, will place New England at a competitive
disadvantage. And, CTDOT
adds, what makes matters even worse is that the Conrail monopoly in
New England will be assigned to
CSX, which will be less inclined to extend intermodal service into
New England than NS would be.(500)
CTDOT therefore contends that, for competitive reasons and environmental
reasons alike,(501) we should
approve the transaction only with conditions: to ensure competitive access to
Connecticut for two or
more Class I railroads, by extending the North Jersey SAA easterly through
New York City and
Westchester County, NY, along the Northeast Corridor to New Haven; to
ensure competitive connections
to national markets for shortline and regional railroads in New England;
to provide incentives for the
truck-to-rail diversion of traffic in the I-95 corridor; and to ensure the
application of uniform,
competitive rates for shippers in Connecticut and other areas east of the
Hudson. CTDOT also contends
that we should retain jurisdiction to implement changes as warranted in the
future to ensure that the goal
of competitive rail freight access to all regions is realized.

CONSERVATION LAW FOUNDATION. CLF, an environmental group
based in New
England that supports rail as a sensible alternative to the urban sprawl and
air pollution that will result
from endless highway expansion, asks that we require CSX: to work with the
Massachusetts Bay
Transportation Authority and Amtrak in providing improved, faster passenger
rail service and increased
access between Albany and Boston; and to make every effort to improve freight
rail service east of the
Hudson River, especially from New York City and the ports of New Jersey to
New England.

DELAWARE RIVER PORT INTERESTS. The Philadelphia Regional
Port Authority, the
South Jersey Port Corporation, The Delaware River Port Authority, and The Port
of Philadelphia and
Camden, Inc. (referred to collectively as the Delaware River Port Interests)
support the CSX/NS/CR
transaction but contend: that CSX and NS must honor the agreements they have
made with various
parties; that the Board should establish guidelines and oversight requirements
to ensure that
implementation of the transaction does not result in a repetition of the
problems that occurred as the
UP/SP merger was implemented; and that implementation should not take
place until all necessary labor-enabling agreements are effective, and until
state, county, and local governments have been given an
opportunity to provide input to CSX and NS on their detailed operating plans.
Nor, the Delaware River
Port Interests add, should implementation take place prior to the time that
(a) all Conrail computer data is
accessible and usable in providing customer service, (b) a determination has
been made as to which
Conrail personnel must be retained to provide at least the level of service
that Conrail provided, and such
personnel are employed by CSX and NS, and (c) the train schedules as provided
to the Board are actually
ready to be implemented.

DELAWARE VALLEY REGIONAL PLANNING COMMISSION. DVRPC, the
metropolitan planning organization for the nine-county Delaware Valley
region,(502) contends that, with
the dissolution of Conrail, that region stands to lose a crucial employer,
transportation provider, and civic
leader. (a) DVRPC, which argues that the Delaware Valley region's losses
will exceed 1,800 direct jobs,
1,800 indirect jobs, and $100 million of annual income, believes that a
commitment for economic
development should be proposed by applicants to help offset these losses. (b)
DVRPC, which notes that
the Delaware Valley region, an ozone nonattainment area, is affected by ozone
precursors emitted by
mobile sources, contends that attention should be accorded to the air quality
impacts of proposed new
rail facilities. (c) DVRPC, noting that the Delaware Valley region's rail
passenger operators and Conrail
share the use of each other's tracks, contends: that existing trackage rights
and dispatching agreements
should remain in force for at least 10 years; that the passenger carriers
should have reasonable access to
regional freight lines, including lines not currently served; and that the
freight operators should have
adequate access to shippers located on passenger lines. (d) DVRPC insists
that applicants must provide
guarantees for the continuation of current levels of doublestack and
conventional intermodal services
both at Ameriport and at the new, proposed Greenwich intermodal terminal. (e)
DVRPC contends that,
to safeguard the interests of the Delaware Valley region, there should be: an
official mechanism to allow
public input into the management of the South Jersey/Philadelphia SAA; and
provisions to ensure long-term maintenance of SAA facilities in good
condition. (f) DVRPC, noting that the CSX/NS/CR
transaction contemplates continued train operations on the left bank of the
Schuylkill River through
Center City Philadelphia between Park Junction and Grays Ferry, contends that,
to limit the adverse
impacts of such operations, the diversion of all train traffic to the Highline
Branch on the right bank of
the Schuylkill River should be pursued.

EIGHT STATE RAIL PRESERVATION GROUP. ESRPG's interests in
this proceeding are
focused on the Youngstown-Meadville-Corry-Hornell rail line, which ESRPG refers
to, in its entirety, as
the Southern Tier Extension. ESRPG claims: that the Southern Tier Extension
once extended west from
Hornell all the way to Chicago; that major portions of the Extension west of
Youngstown have been
abandoned and removed; but that, between Youngstown and Hornell, the Extension
remains basically
intact. ESRPG further claims: that CSX and NS hope to capture large volumes
of traffic that now move
by truck; that, however, these large volumes promise to tax the Conrail routes
that CSX and NS will
acquire far beyond their capacities; and that the Youngstown-Hornell line is
ideally situated to furnish
the additional capacity that will surely be needed in the years to come. ESRPG
therefore asks that we
require NS to maintain the Youngstown-Meadville and Corry-Hornell segments of
the Southern Tier
Extension in a condition adequate to accommodate through traffic on a
continuous basis (by which
ESRPG means that all trackage would have to be maintained at least to FRA Class
2 safety standards,
permitting train speeds of at least 25 mph). ESRPG notes that the relief it
seeks would require NS to
restore those segments to that condition if they are currently below that
condition, and would require NS
to repair the washouts on the Corry-Hornell segment and otherwise restore that
segment to operable
status.

EMPIRE STATE PASSENGERS ASSOCIATION. ESPA's interests in
this proceeding are
focused on the rail passenger service that will be provided post-transaction
over the "Empire Corridor"
lines linking Niagara Falls, Buffalo, Albany, and New York City. ESPA, which
is an association
dedicated to improving and expanding Amtrak, mass transit, and bus service in
New York State,
indicates that, during the course of this proceeding, CSX (to which the Empire
Corridor lines will be
assigned) has taken several steps that have given ESPA considerable comfort
that CSX has been listening
to ESPA's concerns and wants to cooperate with both Amtrak and New York State
on passenger service.
ESPA notes that it is gratified with this turn of events, and wants to commend
CSX by giving it a
qualified endorsement for its application. ESPA asks, however: (1) that we
condition approval of the
CSX/NS/CR transaction on certain commitments made by CSX in a December 19,
1997, letter sent by
Paul H. Reistrup, CSX's "Vice President Passenger Integration," to William E.
Sanford, Chair of the
Empire Corridor Rail Task Force for the Onandaga County Legislature;(503) and (2) that we retain
oversight jurisdiction to ensure that CSX's performance matches its promises.(504)

ERIE-NIAGARA RAIL STEERING COMMITTEE. ENRSC, an ad hoc
committee
representing business interests in New York State's Niagara Frontier region,
contends that the
CSX/NS/CR transaction will inflict direct competitive harm upon shippers
located in that region.
ENRSC claims: that, since 1976, shippers in the Niagara Frontier region have
had to endure the burdens
of the Conrail monopoly; that Conrail now controls the major revenue stations
in the Niagara Frontier
region, and originates and terminates the substantial majority of all Niagara
Frontier rail traffic; that,
although NS, CP/D&H, CN, and several shortlines have some physical access
to the Niagara Frontier
region, these carriers have no direct access to most of Conrail's principal
revenue stations; and that
Conrail has steadily reduced the number of Niagara Frontier shippers that can
obtain access via
reciprocal switching to the services of other rail carriers.(505)

ENRSC fears that the CSX/NS/CR transaction will adversely impact Niagara
Frontier shippers in
a variety of ways. (1) ENRSC claims that the Niagara Frontier market will
remain largely captive to
CSX (which will replace Conrail as the region's dominant rail carrier) and, to
a lesser extent, NS. (2)
ENRSC claims that many Conrail single-line moves will henceforth be CSX/NS
joint-line moves
because, although the vast majority of Conrail stations in the Niagara Frontier
region will be assigned to
CSX, the Conrail destinations for traffic originating in the Niagara Frontier
region and the Conrail
origins for traffic destined to the Niagara Frontier region will be split
between CSX and NS. (3) ENRSC
claims that another element of competitive harm occurring as a result of the
CSX/NS/CR transaction is
the elimination of reciprocal switching that occurred when Conrail made
wholesale cancellations of
reciprocal switching services in the Niagara Frontier area. ENRSC argues, in
essence: that 1995 should
be the operative date for determining a Niagara Frontier shipper's 2-to-1
status for purposes of the
present proceeding; and that the shippers that were deprived of reciprocal
switching by Conrail's 1996
cancellations have been adversely impacted by the CSX/NS/CR transaction.(506) (4) ENRSC claims that
certain shippers located on the Buffalo waterfront on a line of the former
Buffalo Creek Railroad will
suffer 2-to-1 impacts on account of the CSX/NS/CR transaction. ENRSC argues:
that these shippers
now have access both to Conrail (which owns the line) and to CSX (which has
trackage rights over the
line); and that, although the line will be assigned to CSX, the CSX trackage
rights will not be assigned to
NS.(507) (5) ENRSC claims that the
acquisition premium paid for Conrail will result in higher
transportation rates for captive shippers in the Niagara Frontier region. (6)
ENRSC claims that, whereas
most rail-dependent businesses in the Niagara Frontier region will generally
continue to have access to
only a single railroad, rail-dependent businesses in the three SAAs that will
be created by applicants will
henceforth have access to two railroads.

NITL, CP, and CN Agreements. ENRSC contends that neither the NITL
agreement nor the
settlement agreements entered into by CSX with CP and CN will mitigate the
anticompetitive impacts
that the CSX/NS/CR transaction will have in the Niagara Frontier region. The
reciprocal switching
provisions of the NITL agreement, ENRSC argues, will only benefit the
relatively few shippers in the
Niagara Frontier region that still have reciprocal switching service available
from Conrail; but, because
the NITL agreement does not provide for the establishment of reciprocal
switching services at locations
where such service is not now provided by Conrail, the NITL agreement, ENRSC
insists, does nothing to
correct the loss of competitive rail service that has already occurred in the
Niagara Frontier region. And,
ENRSC adds, the settlement agreements entered into by CSX, on the one side,
and, on the other side, CP
and CN, provide only modest opportunities for CP and CN to obtain relatively
insignificant reductions
by CSX in its required revenue share for new traffic that might move via the
Niagara Frontier region.

"Public Interest" Standard. ENRSC argues that we should not focus
primarily on the potential
benefits of operating and economic efficiencies that may or may not be
generated by the CSX/NS/CR
transaction; we should focus instead, ENRSC insists, on the potential benefits
of the increased rail
competition that the transaction may or may not allow. And, ENRSC adds, our
analysis of the increased
rail competition that may or may not result from the CSX/NS/CR transaction
should consider:
(i) whether the transaction fulfills the goals of the Final System Plan;
and (ii) whether the transaction
complies with the "balanced competition" principle that holds that the largest
markets must be served by
at least two large railroads.(508) ENRSC also
contends that, because the combination of the preservation of
the Conrail monopoly in the Niagara Frontier region and the establishment of
new rail competition in the
three SAAs will inflict competitive harm upon businesses located in the Niagara
Frontier region, that
region is entitled to relief even under the traditional analysis of railroad
consolidations.

Conditions Requested. ENRSC has proposed three alternative
conditions. Condition #1 is the
preferred alternative; Condition #2 is a less preferable alternative to
Condition #1; and Condition #3 is a
less preferable alternative to Conditions #1 and #2.(509)

Condition #1 contemplates: (i) the creation of a Niagara Frontier SAA that
would enable all
current and future customers that are or will be served by the Conrail lines
within the limits of the
Niagara Frontier region to receive direct and equal access to rail service from
both CSX and NS; and (ii)
the establishment of reciprocal switching arrangements for all current and
future customers that are or
will be served by the Conrail lines within the limits of the Niagara Frontier
region that would allow other
rail carriers serving the region (such as CN, CP, and existing shortlines) to
provide competitive service at
a reasonable level of charges (i.e., $156 per car, subject to adjustment).

Condition #2 contemplates the reciprocal grant of terminal trackage rights
by CSX and NS (to
NS and CSX, respectively) for operations over the Conrail lines within the
limits of the Niagara Frontier
region, with trackage rights compensation set at $0.29 per car mile.

Condition #3 contemplates the establishment by CSX and NS of reciprocal
switching to all
current and future customers that are or will be served by the Conrail lines
located within the Niagara
Frontier region, and further contemplates the establishment of a reasonable
reciprocal switching charge
(i.e., $156 per car). The reciprocal switching contemplated by Condition #3
would be open to all rail
carriers that currently have access to the region and that wish to provide
service to customers located at
points that would otherwise be served only by CSX or only by NS.

GENESEE TRANSPORTATION COUNCIL. GTC, the metropolitan
planning organization
for the nine-county "GTC region" in Upstate New York (the nine counties
are Orleans, Monroe, Wayne,
Genesee, Wyoming, Livingston, Ontario, Seneca, and Yates), supports the
CSX/NS/CR transaction in
principle(510) but has asked that we impose
certain conditions that, GTC claims, would correct various
problems that have developed during the years Conrail has been the dominant
railroad in the GTC
region.

Conditions Requested. (a) GTC asks that CSX be required to
establish an intermodal terminal in
Rochester, to allow Rochester shippers to participate, on a competitive basis,
in the service CSX
proposes to open up between points in the Midwest and the Southwest and on the
West Coast, on the one
hand, and, on the other, Boston/New York. (b) GTC asks that NS be
required either (i) to establish an
intermodal terminal east of Rochester at Exit 42 on I-90, or (ii) to
cooperate with the Rochester &
Southern Railroad (R&S) in the establishment of an intermodal terminal in
Rochester (such cooperation,
GTC adds, would have to include the creation of joint through routes and
service between Rochester and
the Southeast). GTC claims that an NS (or R&S) intermodal terminal would
give the GTC region truck-competitive intermodal service between points in the
GTC region and points in the Southeast east of
I-75, and would thereby allow the region to compete with shippers in the
eastern part of New York who
will enjoy, post-transaction, new north-south intermodal lanes.(511) (c) GTC asks that CSX be required to
remove Conrail-imposed interchange restrictions on two local shortlines, the
Livonia, Avon & Lakeville
(LAL) and the Falls Road Railroad (FRRR). (d) GTC asks that CSX be
required to reduce Conrail's
Rochester reciprocal switching charge from its current level of $390 per car to
a level not in excess of
120% of variable cost. GTC claims that such a reduction would remove a barrier
to competition by R&S
as respects the many industrial sidings in Rochester to which only Conrail has
direct access. (e) GTC
asks that we establish oversight of the proposed CSX/NS joint usage agreement
respecting the
Monongahela coal fields, to ensure fair and impartial enforcement of the terms
of that agreement.
(f) GTC asks that CSX be required to upgrade the Amtrak Empire Corridor
between Buffalo and
Schenectady from Class 4 to Class 5.(512)

Appropriate Standards. GTC concedes, in essence, that its
conditions are largely directed to
problems that predate the CSX/NS/CR transaction. GTC contends, however, that,
given the unique
character of a transaction that will establish the rail system east of the
Mississippi River for generations
to come, we would be better advised to broaden our view of what constitutes
"adequacy of transportation
to the public" and "the public interest," as those terms are used in 49 U.S.C.
11324. A condition that
enhances the adequacy of transportation, GTC argues, is in the public interest,
even if the problem that
condition will correct predates the transaction.

MAINE DEPARTMENT OF TRANSPORTATION. MEDOT's concerns
respecting the
CSX/NS/CR transaction involve: competitive access for Maine shippers; better
access to markets;
enhanced capacity and intermodal operations; and passenger rail service.
Choice, competition, and
capacity are essential, MEDOT contends, if Maine is to have affordable and
effective rail service that
advances its competitiveness. MEDOT therefore asks that we impose certain
conditions intended to
assure that the effects of the CSX/NS/CR transaction will be beneficial, rather
than harmful, to the State
of Maine. (1) MEDOT seeks assurances that future competitive access to
Maine and, more broadly, to
New England by both CSX and NS will be provided. One way to improve the
situation, MEDOT
contends, would be to grant NS trackage rights between Albany, NY, and
Worcester, MA; common
access through a neutral carrier, MEDOT adds, would also be adequate. MEDOT
suggests that, if we
approve the transaction: we should require a periodic review of competitive
access issues in New
England; and we should retain jurisdiction to impose additional relief.
(2) MEDOT, which contends that
real cooperative efforts would be beneficial for both freight operations and
passenger operations, asks
that we impose conditions: allowing a means for attaining on-time performance
for passenger trains;
creating a process to address the initiation of new or special services;
establishing standard and
reasonable formulas for variable and fully allocated costs; creating liability
standards; and establishing a
means of allowing higher passenger train speeds.

NADLER DELEGATION (NY & CT). The interests of the
Nadler Delegation are focused on
an area (referred to as "the Region") that consists of: the City of New York,
NY; Long Island, NY;
Westchester County, NY; and the State of Connecticut. The Nadler Delegation
notes: that the Region is
currently rail-served from Selkirk, NY, via Conrail's Hudson Division; that
Conrail also operates freight
service between Fresh Pond Yard and New Haven, CT; that NYCH operates a
float service across New
York Harbor;(513) that NYAR operates freight
service on the New York State-owned LIRR; and that P&W,
which connects with Conrail at New Haven, has trackage rights (limited to
carriage of construction
aggregates in unit trains) between Fresh Pond Yard and New Haven. The Nadler
Delegation claims: that
the Region generates 142 million tons of freight per year, 98 million tons
of which is rail-appropriate;
that, because the Region has a 19th Century rail infrastructure, just 2.8%
of the 98 million tons of the
Region's rail-appropriate freight currently moves by rail; and that the other
97.2% moves by truck.

Loss of Rail: Economic Consequences. The Nadler Delegation
contends that much of the
economic dislocation now evident within the Region can be traced to a
termination of rail services that
occurred in 1968 after the Penn Central Transportation Company (the Penn
Central) was required to take
over the New York, New Haven and Hartford Railroad Company (the New
Haven). The Nadler
Delegation claims: that the Penn Central closed the cross-harbor rail car
float service that until then had
been operated by the New Haven between its line at Bay Ridge (in Brooklyn) and
the former
Pennsylvania Railroad facilities at Greenville (in Bayonne, NJ);(514) that the consequences of this loss of
rail service were immediate (between 1968 and 1976, the City of New York lost
342,000 manufacturing
jobs); and that no factor other than the degradation, and then the termination,
of the quality rail freight
services that New York City had previously enjoyed can explain the enormity of
the City's employment
losses among industrial, warehouse, wholesale, harbor, and other blue collar
occupations. The Nadler
Delegation further contends that, since the withdrawal of rail service, the
Region has had to rely almost
entirely on truck transport. The Nadler Delegation claims: that truck
transport is more expensive than
rail service, particularly for commodities that are better suited to rail; that
truck transport, because of its
greater cost, has not been able to support a diverse economy; and that,
therefore, the fact that rail
transport has not been available has contributed to the creation of an
abnormally white collar economy in
the Region.

Loss of Rail: Environmental Consequences. The Nadler Delegation
contends: that the entire
Region is within an air quality nonattainment area and is the subject of a
State Implementation Plan
required by the Clean Air Act; that the Bronx, via which 60% of all truck
traffic entering or leaving the
Region must pass, has the highest rates of respiratory disease and related
mortality attributable to air
quality in the entire United States; that, in the South Bronx, respiratory
disease death rates are far above
the national average; and that, because there are no coal-burning electrical
generating plants in the
vicinity of the neighborhoods in the South Bronx with the worst respiratory
disease problems, all such
respiratory problems must be attributed to vehicle emissions.

Cross-Harbor Float Could Be Revitalized; RoadRailer and/or COFC Service
Could Be
Instituted. The Nadler Delegation contends: that the efficient operation
of a cross-harbor float service
could divert 14.4 million tons of freight from the highways to rail by the year
2020; and that roughly 4.2
million tons per year would use a float service immediately if it were
realistically available. The Nadler
Delegation further contends that it would be feasible to institute RoadRailer
intermodal service and/or
single container-on-flatcar (COFC) intermodal service on the tracks that run
through the Hudson and
East River tunnels (these tunnels are linked by tracks that run through
Pennsylvania Station in
Manhattan).

Opposition To The CSX/NS/CR Transaction. The Nadler Delegation
contends that the
CSX/NS/CR transaction fails the 49 U.S.C. 11324(c) "public interest"
test. The Nadler Delegation
claims: that, because applicants do not intend to provide essential rail
service within the Region, the
transaction violates their 49 U.S.C. 11101 common carrier obligations; that the
transaction will cause
further economic dislocation in the Region; that the transaction, by creating
new rail competition in
Northern New Jersey while simultaneously preserving the old rail monopoly in
the Region, will place the
Region at a tremendous economic disadvantage; that, because CSX and NS intend
to compete in the
Region by drayage from their New Jersey terminals, the transaction will cause
further deterioration in air
quality levels in the Region; that, given the location of key highways within
the Region, the transaction
will result in substantial environmental degradation within areas of the Region
with large minority
populations, which areas are already suffering tremendous rates of disease
related to excessive levels of
air pollution; and that the transaction will result in no material improvement
in transportation in the
Region that would justify the permanent reduction in transportation options,
economic opportunities, and
environmental quality that the transaction will cause.

Conditions Requested. The Nadler Delegation contends: that the
current rail situation has not
worked well for the Region and, for this reason, should not be allowed to
continue;(515) that, if the public
interest is to be served, the rail system within the Region must be
rationalized; that rationalization
requires the establishment of a competitive east-of-the-Hudson route, which
itself requires that major
carriers be granted east-of-the-Hudson access to friendly connections; that the
inclusion in the Conrail
Shared Assets Operator (CSAO) of the cross-harbor floats and the lines
connecting the floats to the
feeder lines to the east, up to and including the P&W line, is essential to
the future success of the cross-harbor floats; and that, without a
rationalization of the Region's rail system, applicants will not be able to
provide efficient and needed rail services to the public. The Nadler
Delegation therefore contends that
we should make approval of the CSX/NS/CR transaction subject to several
conditions, and that we
should retain jurisdiction to fix compensation in the event the interested
parties are unable to reach
agreement.

Condition #1 would require the extension of the CSAO from Bayonne, NJ,
across New York
Harbor to Bay Ridge, by the "acquisition of car float and rail facilities owned
in part by the City of New
York" (i.e., the car float and rail facilities operated by NYCH). Condition
#1, which is premised upon
49 U.S.C. 10907(c)(1) and 11324(c), contemplates, among other things,
access by the CSAO to the 65th
Street Yard (in Brooklyn). The Nadler Delegation claims that, given NYCH's
chronic lack of adequate
capitalization, the increased cross-harbor rail traffic the Delegation
envisions will never be achieved as
long as NYCH's rail assets are allowed to continue under present ownership.

Condition #2 would require the extension of the CSAO from Bay Ridge to
Fresh Pond Jct. by
"the granting of overhead trackage rights on tracks owned by the State of New
York, LIRR" (i.e., the
tracks operated over by NYAR). Condition #2, which is premised upon 49 U.S.C.
11102 and 11324(c),
contemplates, among other things, access by the CSAO to Fresh Pond Yard. The
Nadler Delegation:
concedes that Condition #2 would eliminate NYAR's participation in bridge
traffic between Fresh Pond
and Bay Ridge; but contends that there is presently very little such
traffic, and that NYAR, much like
NYCH, lacks the resources even to maintain, let alone to improve, the vital
rail link that could be
provided over NYAR's lines.

Condition #3 would require the transfer to the CSAO of the Conrail line
from Fresh Pond Jct. (in
Queens) to Pelham Bay (in the Bronx). Condition #2, which is premised upon 49
U.S.C. 10907(c)(1),
contemplates, among other things, the transfer to the CSAO of: the line
between Fresh Pond Jct. and
Oak Point Yard (known as the New York Connecting Railroad line); and Oak Point
Yard.

Condition #4 would require the extension of the CSAO from Oak Point Yard to
Harlem River
Yard (both in the Bronx). Condition #4, which is premised upon 49 U.S.C.
10907(c)(1) and 11324(c),
contemplates, among other things: the transfer to the CSAO of Harlem River
Yard; and access by the
CSAO to the New York Terminal Produce Market (Hunt's Point Market).

Condition #5 would require the extension of the CSAO to a point in
Connecticut where it could
connect directly with the full freight services of the P&W "via trackage
rights on Amtrak's Northeast
Corridor, owned by New York State's Metro-North and by the Connecticut
Department of
Transportation." Condition #5 is premised upon 49 U.S.C. 10907(c)(1) and
11324(c).

Condition #6a would reserve to Amtrak, as the owner or designated operator
of the Northeast
Corridor, the right to negotiate with any responsible operator, including but
not limited to applicants, to
provide intermodal or other direct freight service on the Northeast Corridor,
which service must include
but need not be limited to service through Amtrak's tunnels under the Hudson
and East Rivers. The
Nadler Delegation claims that Condition #6a, which is premised upon 49 U.S.C.
11324(c): would be a
specific exception to the exclusivity of any rights to operate on the Northeast
Corridor granted to
applicants; and seeks only to prevent applicants from being granted the right
to preclude the service
contemplated by Condition #6a.

Condition #6b, which is premised upon 49 U.S.C. 10907(c)(1) and 11324(c),
would require that
the State of New York be granted the right to designate a second operator of
services on the Hudson
Division between Selkirk and Oak Point Yard.

Public Benefits Of The Conditions. The Nadler Delegation
contends: that the creation of a
rationalized rail system within the Region would generate enormous public
benefits; that use of the floats
would lower the cost of transporting a rail carload from a typical mid-Atlantic
origin to a destination on
geographic Long Island by $5.08 per ton; that the transfer of this traffic
from truck to rail would generate
enormous environmental savings (because taxpayers and the general public would
not incur the costs that
would otherwise be incurred on account of adverse environmental effects, e.g.,
the cost of time lost to
disease and the cost of treating that disease); and that the conditions the
Nadler Delegation seeks would
give applicants an incentive to carry by rail much of the 98 million tons per
year of the Region's rail-appropriate freight that currently moves by truck.

NEW YORK CITY ECONOMIC DEVELOPMENT CORPORATION. NYCEDC,
in its
separately filed comments, contends that we should condition approval of the
CSX/NS/CR transaction
upon the grant of the relief sought in the jointly-filed responsive
application.(516)

Horizontal Market Allocation. The CSX/NS/CR transaction, NYCEDC
argues, represents an
agreement by two similarly situated competitors (CSX and NS) to carve up a
market (the New York
Metropolitan Area) and to decide amongst themselves where competition will take
place (in North
Jersey) and where competition will not take place (in New York City and
Long Island). NYCEDC
contends that, under the antitrust laws, this would be considered a horizontal
market allocation and a
per se violation of Section 1 of the Sherman Act.

"Essential Facilities" Doctrine. NYCEDC contends that we should
consider the antitrust
"essential facilities" doctrine, which NYCEDC claims is applicable in the case
of an entity that controls a
facility or other resource that is alleged to be essential to a competitor's
operation. This doctrine,
NYCEDC argues, holds that it is an anticompetitive violation of Section 2
of the Sherman Act if: the
entity that controls the facility or resource is a monopolist; the facility or
resource cannot practically or
reasonably be duplicated by competitors; the monopolist could feasibly deal
with competitors; and the
monopolist refuses to do so. NYCEDC contends that CSX's forthcoming monopoly
east of the Hudson
satisfies the criteria establishing anticompetitive behavior pursuant to the
essential facilities doctrine.

Social Impacts. NYCEDC contends that the adverse impact of the
CSX/NS/CR transaction will
not be limited to shippers and receivers; New York City itself, NYCEDC claims,
will suffer greatly in
the absence of competition along the Conrail line east of the Hudson River.
New York City's ability to
maintain and attract manufacturing and distribution facilities within the City
limits will be weakened; the
many transportation-dependent businesses in New York and Long Island that are
harmed by the lack of
competitive options available to them in their present locations will naturally
look to relocate to places
where they will enjoy greater competition and more choice of service; the lack
of adequate rail
alternatives will mean greater resort to trucks; and the increased congestion
associated with the use of
these trucks will interfere with the economic development of the businesses and
industries located in the
City. And, NYCEDC adds, the increased use of trucks will add to air pollution
in a metropolitan area
that needs to find ways to improve, not worsen, the quality of its air.(517)

NEW YORK DEPARTMENT OF TRANSPORTATION. NYDOT contends
that our
application of the "public interest" standard should not be limited to
consideration of the impact of the
CSX/NS/CR transaction on existing rail competition. NYDOT argues: that the
creation of Conrail was
the result of a complex process, which was intended to preserve rail
competition throughout New York
and the Northeast; that, for various reasons, this process failed to achieve
its competitive goals; that the
emergence of the present Conrail monopoly in important parts of New York
was a result disfavored by
all key participants in the Conrail creation process, including the United
States Railway Association
(USRA); that USRA's primary goal of region-wide rail competition, although not
achieved in 1976, has
reappeared in 1998 as a key theme of the CSX/NS/CR application; and that we
must therefore consider
whether the CSX/NS/CR transaction will allow for the creation of the regional
competition that should
have been created, or preserved, in 1976. And, NYDOT adds, we should also
consider the fact that,
since 1974, the State of New York has invested or guaranteed over
$1 billion dollars in rail service and
infrastructure, much of which was for the support of Conrail and its facilities.

Adverse Impacts East of the Hudson. NYDOT argues: that the New
York Metropolitan Area
and Hudson River Valley are among the country's largest markets for the
consumption of products and
transportation services; that, from a rail perspective, the region is one in
which the State of New York
has an enormous financial stake, in light of past and ongoing public
investments in commuter and inter-city passenger facilities, yards and
terminals, and freight service enhancements;(518) that, however, the
transaction as contemplated by applicants will preserve, within this region,
the existing Conrail
monopoly, while creating, within Northern New Jersey, intramodal competition;(519) and that, in
consequence, "east side" produce distributors, municipal waste and wood
products shippers, and general
merchandise shippers will lose market share and revenue. And, NYDOT adds, a
transaction that leaves
that portion of New York east of the Hudson River without effective rail
competition is at odds with
Congress' clearly intended goals for the rail lines that ultimately became
Conrail. The mandate of
USRA, NYDOT insists, was to preserve as nearly as possible the competitive rail
service that existed in
New York State before the bankruptcies of the early 1970s.

Adverse Impacts in Buffalo. NYDOT contends: that, in the Buffalo
area, the CSX/NS/CR
transaction amounts to a division and allocation of lines and shipping
locations, with no real changes in
the competitive outlook for shippers heretofore dependent on Conrail; that in
the Detroit area, however,
shippers in the Detroit SAA will gain new access to competitive rail service;
that the terminal and related
facilities in the Buffalo area compete with similar facilities in the Detroit
area for important U.S.-Canada
cross-border through traffic; and that, therefore, the CSX/NS/CR transaction,
by creating an SAA in the
Detroit area while preserving the Conrail (henceforth, CSX) monopoly in the
Buffalo area, will put
shippers and other commercial interests in the Buffalo area at a relative
competitive disadvantage.(520)

Passenger Transportation Services. NYDOT contends: that the
State of New York has made
massive investments in railroad passenger operations and facilities; and that
Conrail is the cornerstone of
the New York passenger network, because Conrail's facilities constitute
the backbone of both the
commuter system and the inter-city systems. NYDOT argues that, given New York
State's enormous
stake in the protection of current passenger service levels and in the
preservation of its ability to meet the
public's growing need for expanded and enhanced passenger service, continuing
Board oversight would
be appropriate.

Conrail Contracts. NYDOT claims: that 13 contracts entered into
by New York State and
Conrail remain in effect today, and will require further performance by Conrail
in coming years, see
NYS-10, V.S. Utermark, Exhibit ___ (JAU-5); that these contracts represent
public investments for a
variety of rail maintenance and operation services; that applicants have made
no specific commitment to
carry out Conrail's obligations under these contracts; and that, therefore,
unconditioned approval of the
CSX/NS/CR application could cost New York State millions of dollars in lost
benefits due from Conrail
under these contracts.(521)

MNCR and STWRB. NYDOT contends: that the conditions sought by
MNCR would serve the
public's interest in safe, adequate, and expanded passenger rail service; and
that the conditions sought by
STWRB are reasonable and necessary.

Acquisition Premium. NYDOT contends that appropriate conditions
must be crafted to assure
that the recovery of any difference between the acquisition price and the value
of the acquired assets
does not become a pretext for higher rail rates on freight traffic that has no
competitive alternatives.

Conditions Requested. NYDOT contends that, in view of the adverse
impacts an unconditioned
CSX/NS/CR transaction could be expected to generate, that transaction is not in
the public interest and
should not be approved. NYDOT further contends that, in the event we approve
that transaction, we
must impose certain conditions intended to mitigate these adverse impacts.

(1) NYDOT contends that, to mitigate the adverse impacts that will occur if
CSX is established
as the sole operator of Conrail's New York lines and trackage rights south of
Albany and east of the
Hudson River, we should grant the relief sought by NYDOT and NYCEDC in their
jointly-filed
responsive application. NYDOT adds that we should retain jurisdiction to rule
upon and resolve
potential disputes respecting implementation.

(2) NYDOT contends that, to preserve the competitive balance between
Buffalo and Detroit as
through points for U.S.-Canada trade, we should grant the conditions sought by
the ENRSC and establish
an SAA and reasonable, associated switching terms in and around Buffalo.(522)

(3) NYDOT contends that, to ensure that the CSX/NS/CR transaction does not
adversely affect
commuter and inter-city passenger service, and to monitor applicants'
compliance with other conditions,
we should prescribe a 10-year oversight and reporting condition, and retain
jurisdiction to impose such
further or additional conditions as may be necessary. NYDOT specifically
contends: that we should
order CSX and NS to maintain their operations and facilities so that they can
sustain both the present
level of passenger operations in New York and future operations dictated by
New York's investments and
its expanding and dynamic needs; that we should require an express commitment
by applicants to
continue the New York program to achieve high speed passenger service between
New York City and
Albany (125 mph) and between Albany and Buffalo (100 mph); that we should
require an express
commitment by applicants to enhance and expand their passenger facilities in
conjunction with Amtrak
as circumstances require, consistent with New York's investment in Conrail
facilities; and that, in view
of New York's investment in facilities benefitting Conrail and Conrail's
reciprocal commitments, New
York must be entitled to petition for and receive Board orders that will compel
applicants to meet
New York's reasonable needs for passenger service.

(4) NYDOT contends that, to protect the public investments made by the
State of New York and
to ensure that unfulfilled contractual undertakings made by Conrail are fully
honored by its successors:
we should impose a condition that will serve to memorialize, and make
enforceable, applicants'
"stipulation" respecting the 13 referenced contracts with New York and its
agencies, see NYS-10,
V.S. Utermark, Exhibit ___ (JAU-5); and we should confirm that, because
full compliance with these
contracts will in no way interfere with the carrying out of the CSX/NS/CR
transaction, a 49 U.S.C.
11321(a) override or avoidance of these contracts is not necessary.

(5) NYDOT contends that we should grant the conditions sought by MNCR and
STWRB.

(6) NYDOT contends that we should impose appropriate conditions to ensure
that captive New
York shippers do not suffer unreasonable rate increases as a consequence of the
high price applicants
paid for Conrail. The conditions NYDOT has in mind would require CSX and NS to
record their
acquisition costs at historic book values for ratemaking purposes.

Other Parties: LAL, NECR, and NWPRA. (1) NYDOT contends that we
should grant the relief
sought by LAL, and that we should take action to protect connecting railroads
like LAL from the harms
threatened by the anticompetitive aspects of the proposed transaction.
(2) NYDOT contends that we
should grant the relief sought by NECR, but adds that, because the trackage
rights sought by
NYDOT/NYCEDC and NECR overlap,(523) we must
take care to ensure that all arrangements governing
access to the common segment provide for such access on an equal and
nondiscriminatory basis. (3)
NYDOT contends that, unless NWPRA can demonstrate that the operations it has
proposed are feasible
and compatible with the through service that NYDOT expects NS will conduct
across the Southern Tier
Extension (between Corry, PA, and Hornell, NY), the relief sought by NWPRA
should be denied.

NYDOT & NYCEDC (JOINT RESPONSIVE APPLICATION). NYDOT
and NYCEDC
claim: that, at present, all rail freight originating or terminating in the
New York City/Long
Island/Northern New Jersey area, and in the Hudson River Valley (between the
New York Metropolitan
Area and Albany), must be handled by Conrail; that, however, although the new
North Jersey SAA will
give shippers in Northern New Jersey direct access to CSX and NS, and although
a new NS/CP haulage
arrangement for through service via Albany may create additional new options
for west-of-the-Hudson
shippers, east-of-the-Hudson shippers will continue to be dependent on a single
carrier (CSX); and that it
necessarily follows that east-of-the-Hudson shippers will be disadvantaged
relative to their west-of-the-Hudson counterparts. NYDOT and NYCEDC further
claim that exclusive service by CSX on the east
side of the Hudson may disrupt the prevailing trade flows of New York City and
Long Island. NYDOT
and NYCEDC contend: that much of the New York area's traffic is
originated in Canada, New England,
the Upper Midwest, and the West; that CSX, in an attempt to develop
North-South traffic flows bridging
its territory with Conrail territory, will favor traffic moving from/to the
South as opposed to traffic
moving from/to Canada, New England, the Upper Midwest, and the West; that
it is likely that shippers of
freight originating in Canada, New England, the Upper Midwest and the West
will attempt to use truck
transport to remain competitive; and that, therefore, the traffic may continue
to flow, but the congestion
on New York City's highways and bridges will be greatly increased.

Trackage Rights Requested. NYDOT and NYCEDC therefore ask that we
require the grant of
unrestricted (full service) trackage rights in favor of a rail carrier other
than Conrail or CSX, to be
designated jointly by NYDOT and NYCEDC, over Conrail's lines: (i) between the
points of connection
with CP/D&H at CP-160 near Schenectady, NY, and at Selkirk Yard near
Selkirk, NY, on the one hand,
and, on the other, CP-75 near Poughkeepsie, NY, with sufficient rights on
tracks within Selkirk Yard to
permit the efficient interchange of freight with CP/D&H; and
(ii) between Mott Haven Junction (in the
Bronx) and the point of connection with the lines of the LIRR near
Fresh Pond (in Queens), via Harlem
River Yard and Oak Point Yard.(524)

Declaration Requested. NYDOT and NYCEDC indicate that, because
the lines between CP-75
and Mott Haven Junction are controlled by Metro-North Commuter Railroad Company
(MNCR),(525) any
new railroad operating between CP-160 and/or Selkirk Yard, on the one hand,
and, on the other, Fresh
Pond, will have to obtain, from MNCR, operating rights over the lines between
CP-75 and Mott Haven
Junction. This, however, should not be an insurmountable obstacle, because
MNCR has indicated that it
is prepared to negotiate the granting of such rights. NYDOT and NYCEDC note,
however, that,
although MNCR contends that it is not prohibited or otherwise restricted, by
the terms of any agreements
now in effect, from granting the necessary rights, there is a question
respecting MNCR's ability to grant
such rights. NYDOT and NYCEDC therefore ask that, to the extent necessary to
permit uninterrupted
rail freight transportation between CP-160 and/or Selkirk Yard, on the one
hand, and, on the other, Fresh
Pond, we issue a declaration that, pursuant to 49 U.S.C. 11321(a), MNCR
may grant, to a rail carrier
other than Conrail or CSX, unrestricted trackage rights over the lines between
CP-75 and Mott Haven
Junction, notwithstanding any provisions of any agreements that purport to
limit or prohibit such a
grant.(526)

Purposes Served. NYDOT and NYCEDC contend that the relief they
seek would allow for the
preservation of the competitive balance that now exists in the New York
Metropolitan Area and the
Hudson River Valley, by extending to shippers in New York City and Long Island,
and on the eastern
side of the Hudson River Valley, the same benefits of intramodal competition
that applicants propose to
confer on shippers in the North Jersey SAA.(527)

NORTHWEST PENNSYLVANIA RAIL AUTHORITY. NWPRA indicates:
that it owns the
Meadville-Corry line between MP 102.3 (in Meadville) and MP 60.8 (in
Corry); that it is the lessee of an
additional 0.3-mile segment of that line, between MPs 60.8 and 60.5 in
Corry; that its operator, the Oil
Creek and Titusville Lines - Meadville Division (OC&T), is authorized to
provide common carrier rail
service between MPs 102.3 and 60.5; and that it expects Conrail to convey to
NWPRA the additional
0.3-mile segment, upon the expiration of Conrail's Southern Tier Agreement with
NYDOT. NWPRA
claims: that the CSX/NS/CR transaction contemplates that NS will acquire, and
provide common carrier
rail service over, the Conrail line running via Corry between Erie, PA, and
Hornell, NY;(528) that NS, to
provide such service, will have to operate over the 0.3-mile segment; that,
however, OC&T is the only
railroad common carrier authorized to provide rail service on the 0.3-mile
segment;(529) and that it
therefore follows that NS, if it intends to provide through rail service
between Erie and Hornell, will
have to acquire trackage rights from NWPRA.

It so happens, NWPRA adds, that it has interests of its own in connection
with the Meadville-Corry line, because (NWPRA claims) efficiencies and
opportunities for traffic growth on the Meadville-Corry line can only be
advanced if OC&T is allowed to connect with its affiliate, the NY&LE, at
Waterboro, NY (MP 23.2). NWPRA therefore contends that, because NS needs
trackage rights over the
0.3-mile segment and because NWPRA (OC&T) needs trackage rights over the
Corry-Waterboro
segment, we should impose a condition requiring a "reciprocal" grant of
overhead trackage rights
between NS and NWPRA/OC&T. The reciprocal grant contemplated by NWPRA
would consist of: (i)
a grant to NS of trackage rights between MPs 64.1± and 60.5;(530) and (ii) a grant to OC&T of trackage
rights between MP 60.5 in Corry and the connection with the NY&LE at MP
23.2 in Waterboro.

NYDOT's Reply. NYDOT contends: that NWPRA should not be allowed
to compromise viable
through service over the Southern Tier Mainline (which runs from Northern New
Jersey through
Binghamton and Hornell to Buffalo, NY) and/or the Southern Tier Extension; that
NWPRA's requested
condition, which seeks to put OC&T on a segment of track comprising an
essential piece of an NS
through route, threatens to interfere with New York's plans for improved rail
service on the Southern
Tier lines; and that NWPRA has provided no assurance that the service it
contemplates can co-exist with
NS' through operations on the Southern Tier Extension. NYDOT therefore insists
that, unless NWPRA
can demonstrate that its proposed operations are feasible and compatible with
NS through service across
the Southern Tier Extension, the relief sought by NWPRA should be denied.(531)

Applicants' Rebuttal. Applicants contend that, although NS will
indeed conduct through service
between Erie and Hornell, it will conduct such service via Buffalo, and not via
the Southern Tier
Extension. It therefore follows, applicants note, that NS neither needs nor
wants trackage rights over the
0.3-mile segment between MPs 60.8 and 60.5.

NWPRA's Brief. NWPRA claims that NS' admission that it will not
conduct through service on
the Southern Tier Extension means that NS will continue the process of line
degradation and
segmentation that Conrail has pursued. NWPRA argues: that NS has failed to
demonstrate that the
Corry-Waterboro overhead trackage rights sought by NWPRA are inconsistent with
the public interest;
that, in fact, such trackage rights would allow for the preservation of
alternative rail routings and
competitive options; and that there is no reason to believe that joint use of
the Corry-Waterboro segment
would cause congestion or operational problems.

PENNSYLVANIA DEPARTMENT OF TRANSPORTATION. The
Commonwealth of
Pennsylvania, Governor Thomas J. Ridge, and the Pennsylvania Department of
Transportation (referred
to collectively as PADOT) support the CSX/NS/CR transaction. PADOT has asked,
however, that we
include in the record in this proceeding two letter agreements dated
October 21, 1997 (one with CSX; the
other with NS). Each letter contains various "proposals" respecting the
CSX/NS/CR transaction, and is
addressed both to the Honorable Thomas Ridge, Governor of Pennsylvania, and to
the Honorable
Edward Rendell, Mayor of Philadelphia. PADOT indicates that the two agreements
(the agreement with
CSX, as memorialized in the CSX letter; and the agreement with NS, as
memorialized in the NS letter)
do not require the imposition of any conditions by the Board. PADOT adds,
however, that the two
agreements may be considered by the Board as constituting representations that
applicants will comply
with their respective terms.(532)

PENNSYLVANIA TRANSPORTATION COMMITTEES. The Pennsylvania
House and
Senate Transportation Committees (the Pennsylvania Transportation Committees)
have several concerns
respecting the CSX/NS/CR transaction.

Concern #1: Regional and Shortline Competitive Access Issues.
The Pennsylvania
Transportation Committees urge resolution of certain regional and shortline
competitive access issues,
including: (a) access by B&LE to the Monongahela coal fields through
trackage rights and appropriate
haulage arrangements with CSX and/or NS;(533)
(b) the elimination of the interchange restrictions that
presently preclude RBMN from interchanging freely with CP; and (c) the grant to
W&LE of reasonable
access trackage rights to competing carriers and gateway interchanges to insure
W&LE's ability to
provide essential services to Western Pennsylvania shippers. These competitive
access conditions, the
Pennsylvania Transportation Committees claim, are particularly important
because the CSX/NS/CR
transaction will restructure long-established traffic patterns and route
relationships in fundamentally
anticompetitive ways, and because (the Pennsylvania Transportation Committees
claim) the only
effective way to counter this reduction in competition is to grant regional and
shortline railroads
competitive access to carriers other than NS so that shipper options can be
created to insure continued
rail-to-rail competition between CSX and NS.

Concern #2: Revenue Gains From Projected Intermodal Traffic
Diversions. The Pennsylvania
Transportation Committees claim that applicants have failed to demonstrate the
credibility of the revenue
gains they anticipate from their projected intermodal traffic diversions. The
Pennsylvania Transportation
Committees contend: that applicants' diversion estimates fail to take into
account the impact of
economic downturns or changes in equipment availability in years two through
five of the CSX/NS/CR
transaction; that this failure is highly significant, because the acquisition
premium paid to acquire
Conrail cannot be justified without the diverted intermodal revenues applicants
have projected; and that
the Board, in its determination of the public interest, cannot simply accept
applicants' assumption that
economic conditions as they exist today will continue to exist unchanged into
the future.

Concern #3: Governor Ridge's Support For The CSX/NS/CR
Transaction. Applicants have
noted "that the Governor and the Commonwealth of Pennsylvania support approval
of the Transaction
without conditions." CSX/NS-176 at 147. This statement, the Pennsylvania
Transportation Committees
claim, is true as far as it goes; Governor Ridge, that is to say, has indicated
support for the CSX/NS/CR
transaction and has not asked for conditions. The Pennsylvania Transportation
Committees add,
however, that Governor Ridge has also indicated that he expects applicants to
adhere to all the
commitments they have made; Governor Ridge, that is to say, has premised his
support for the
CSX/NS/CR transaction on a clear understanding that applicants' commitments to
the Commonwealth
will be honored. The characterization of Governor Ridge's support takes on a
certain significance, the
Pennsylvania Transportation Committees contend, because many of the projects
proposed by applicants
involve the development of intermodal service facilities; and the Pennsylvania
Transportation
Committees fear that, in the event of a future economic downturn, applicants
may be inclined to
postpone or cancel the development of intermodal facilities that have been
promised to the
Commonwealth. The Pennsylvania Transportation Committees, which would prefer
to have a means of
recourse in the event applicants decide not to honor their commitments, have
therefore asked that we
impose, as conditions to the CSX/NS/CR transaction, the commitments applicants
(particularly NS) have
made to the Commonwealth.

Concern #4: CSX/SEPTA Operational & Safety Issues. The
Pennsylvania Transportation
Committees insist that, unless CSX and SEPTA are able to reach a negotiated
resolution of their
differences, we should deny CSX authorization to proceed with its proposed
freight operations over any
rail lines in Philadelphia and surrounding counties that are also used by SEPTA
for commuter rail
operations.(534)

PHILADELPHIA INDUSTRIAL DEVELOPMENT CORPORATION. The City
of
Philadelphia and the Philadelphia Industrial Development Corporation (referred
to collectively as PIDC)
support the CSX/NS/CR transaction. PIDC has indicated, however, that it joins
in PADOT's request that
the two letter agreements previously referenced be made a part of the record in
this proceeding.

RHODE ISLAND DEPARTMENT OF TRANSPORTATION. RIDOT contends
that the
CSX/NS/CR transaction must be conditioned to balance the competitive inequities
that will otherwise be
inflicted upon Rhode Island in particular and New England in general.
RIDOT claims that, without
proper conditions: certain ports, such as those in New York/New Jersey, that
are today served
exclusively by Conrail will henceforth enjoy the benefits of rail-to-rail
competition; other ports,
specifically those in New England, that are today served exclusively by Conrail
will remain subject to
the Conrail (henceforth, the CSX) monopoly; and the combination of new
competition in certain areas
and a preserved monopoly in New England will put New England ports at a
major disadvantage vis-à-vis
other East Coast ports. The problem will be especially serious, RIDOT argues,
in view of the
investments Rhode Island has made to upgrade Amtrak's Northeast Corridor
to handle double stack
containerized freight. RIDOT notes: that, to develop a world class intermodal
port in Rhode Island, a
public/private partnership has invested hundreds of millions of dollars in
infrastructure improvements at
Quonset Point, a former naval base; and that, in connection with that project,
Rhode Island has invested
over $120 million in the construction of a 22-mile freight-dedicated third
track on the Northeast Corridor
between the Rhode Island points of Davisville and Boston Switch, that is
intended to permit safe
operation of modern freight cars to/from Quonset Point (operations will be
conducted by P&W, which
will operate over the Northeast Corridor on the new third track between
Davisville and Boston Switch,
and over its own line between Boston Switch and its connection with Conrail,
henceforth CSX, at
Worcester, MA).

RIDOT asks that we impose several conditions. (1) RIDOT asks that we
require direct access by
a second Class I railroad into New England. (2) RIDOT asks that CSX be
required to enter into an
agreement with Rhode Island committing to a reasonable rate structure that will
assure comparable rates
between the SAAs and the areas that will have, post-transaction, only one Class
I railroad. RIDOT
claims, in essence, that a reasonable rate structure will be necessary to
promote the full development
potential of Quonset Point. (3) RIDOT asks that CSX be required to pledge
that existing and planned
passenger rail operations will not be harmed, and that there will continue to
be adequate access for the
growth of high speed rail and commuter rail services along the Northeast
Corridor.(535) (4) RIDOT asks
that we retain jurisdiction to monitor the rail competition issues, and, if
necessary, to impose remedies as
they are warranted. Provision must be made, RIDOT argues, for Board oversight
and review to ensure
that RIDOT's first three conditions are met for a period of at least 3 to 5
years.

SOUTH JERSEY TRANSPORTATION PLANNING ORGANIZATION. SJTPO,
the
metropolitan planning organization for Atlantic, Cape May, Cumberland, and
Salem Counties, supports
the CSX/NS/CR transaction but suggests conditions: (1) to prescribe a public
voice in the governance of
the SAAs; and (2) to protect operating rights for passenger rail operations and
potential new starts,
especially in the Camden-Millville corridor.

SOUTHERN TIER WEST REGIONAL BOARD. STWRB's interests in
this proceeding(536) are
focused on the eastern segment of a line that runs in a generally east-west
direction between
Youngstown, OH, and Hornell, NY. The line consists of three segments: a
western segment (owned by
Conrail) between Youngstown, OH, and Meadville, PA; a middle segment (once
owned by Conrail and
now owned by NWPRA) between Meadville, PA, and Corry, PA; and a 146-mile
eastern segment
(owned by Conrail, and referred to as the Southern Tier Extension) between
Corry, PA, and Hornell, NY.
The Southern Tier Extension: connects at Corry, PA, with the Erie-Emporium
line of the Allegheny &
Eastern Railroad, Inc. (ALY); connects at Waterboro, NY, with a line of the New
York & Lake Erie
Railroad Company (NY&LE);(537) connects at
East Salamanca, NY, with a line of the Buffalo &
Pittsburgh Railroad, Inc. (BPRR); connects at Olean, NY, with Conrail's
Buffalo-Harrisburg line; and
connects at Hornell, NY, with Conrail's Buffalo-Jersey City "Southern
Tier" line. The CSX/NS/CR
transaction contemplates the assignment, to NS, of the Conrail assets of
interest to STWRB: the
Youngstown-Meadville segment of the Youngstown-Hornell line; the Southern Tier
Extension; Conrail's
Buffalo-Harrisburg line; Conrail's Southern Tier line; and Conrail's trackage
rights over ALY's Erie-Corry line.

STWRB's request for relief has evolved through the course of this
proceeding. See STW-2 at 7-8 (filed October 21, 1997), STW-4 at 2-7
(filed February 26, 1998),(538) and STW-6 at
1-2 (filed June 3,
1998). STWRB sought, in its STW-2 comments, conditions that would have:
required NS to detail its
plans for the Southern Tier Extension; required Conrail to pay a certain sum
said to be owed to NYDOT
under the Southern Tier Agreement, or, in the alternative, required NS to enter
into an extension of the
Southern Tier Agreement;(539) required NS to
repair the washouts at Belmont, Scio, and Alfred, NY, and to
restore the Southern Tier Extension to operable status; and required the
extension, through June 1, 2003,
of the service and maintenance commitments in the Southern Tier Agreement.
STWRB sought, in its
STW-4 brief,(540) conditions that would have
required NS: to honor Conrail's contractual obligations vis-à-vis the
Southern Tier Extension; and to assume whatever other obligations Conrail may
have vis-à-vis
the Southern Tier Extension. STWRB has now advised, in its STW-6 submission,
that an agreement
respecting the Southern Tier Extension has been reached by STWRB, NYDOT, NS,
and Conrail.
STWRB asks, in its STW-6 submission: that we recognize that a voluntary
agreement creating
obligations has been entered into in the context of this proceeding; that we
express our expectation that
the commitments contained in this agreement will be honored by the parties, or
that best efforts will be
made to do so; and that we impose no condition that would hinder or prevent the
implementation or
performance of this agreement (and, in particular, no condition that would
limit or obstruct utilization of
a continuous line of railroad between Erie, PA, Corry, PA, and Jamestown, NY).

SOUTHWESTERN PENNSYLVANIA REGIONAL PLANNING COMMISSION.
SPRPC,(541) which fears that the CSX/NS/CR
transaction may jeopardize the essential rail services now
provided by W&LE, supports the imposition of competitive access trackage
rights or other conditions
that will assure W&LE's continued viability and preserve the rail freight
service it now provides. SPRPC
also supports B&LE's efforts to gain access to the Monongahela coal fields
through trackage rights and
appropriate haulage arrangements with CSX and/or NS.(542)

STATE OF VERMONT. The State of Vermont cites four public
harms that would occur if
NECR were to fail on account of the CSX/NS/CR transaction: (1) NECR would no
longer be able to
make available to Amtrak at reasonable cost FRA class 3 track between Palmer,
MA and St. Albans, VT;
(2) NECR would no longer be able to provide interchange access to Vermont
shortlines at Bellows Falls,
Montpelier Junction, and Burlington, VT; (3) increased highway maintenance
costs would be incurred
with the diversion of NECR freight traffic to the highways (I-91 and I-89) that
parallel much of the
NECR mainline; and (4) the competitive position of Vermont businesses that
would lose access to
quality rail freight service would be eroded. The State of Vermont argues
that, to mitigate the
consequences of the CSX/NS/CR transaction and to prevent the loss of essential
rail services on the
NECR rail system, including rail passenger services operated by Amtrak over the
NECR rail system, we
should grant NECR the trackage rights it has requested.

TRI-STATE TRANSPORTATION CAMPAIGN. TSTC, a consortium of
groups working to
promote an economically and environmentally sound transportation system in the
New York
Metropolitan Area, seeks to reduce reliance on cars and trucks throughout the
region in order to reduce
congestion and pollution and to support rational land use planning. TSTC
contends: that it is in the
public interest to reach destinations east of the Hudson by rail, because rail
provides the only realistic
option for the region to reduce, or reduce the rate of growth in, truck
movements; that, to make rail
viable east of the Hudson, it is essential that there be competitive rail
options; and that the way to
achieve competitive rail options east of the Hudson is to extend NS operations
into that region.

(1) Improved Cross-Harbor Car Float. TSTC contends that, to gain
competitive rail access east
of the Hudson, there must be a high-quality cross-harbor car float service on
the Greenville-Bay Ridge
route. TSTC suggests three options. (a) Option A would require NS to
operate a car float across the
New York-New Jersey Harbor. (b) Option B would require NS to buy the NYCH
operation and to make
certain improvements intended to complement long-standing investments made by
city and state
agencies. (c) Option C would require NYCH and the government agencies
that have invested in assets
that could be used by NYCH to prepare a plan regarding management, operations,
capital, and physical
plant that would ensure effective service across the Harbor.

(2) NS Trackage Rights To Bronx Yards. TSTC asks that NS be given
trackage rights (over
Conrail and NYAR) to enable it to operate to Oak Point Yard and Hunts Point
Market (both in the
Bronx).

(3) NS Trackage Rights To New Haven. TSTC asks that NS be given
trackage rights over the
Northeast Corridor to New Haven.

(4) NS Trackage Rights Through Manhattan. TSTC asks that any
residual Conrail rights to
operate freight trains via the Pennsylvania Railroad tunnels through Manhattan
be transferred to NS, and
that NS be encouraged to route, via these tunnels, RoadRailers and other
low-profile equipment. TSTC
adds that, to augment this service during busy daytime hours, or in the event
that NS is unable to secure
rights through Penn Station, NS should operate RoadRailers on its cross-harbor
car float.

(5) CSX Intermodal Terminal At Harlem River Yard. TSTC asks that
CSX be required to operate
a regular piggyback service to the Harlem River Yard.

(6) Enhancements At Oak Island Yard. TSTC asks that CSX and NS be
required to develop a
plan of specific capital improvements to enhance operations at Oak Island Yard
in Newark, NJ, which is
the region's sole remaining hump classification yard and which could be used to
facilitate increased NS
carload traffic to points east of the Hudson via the cross-harbor car float and
the trackage rights TSTC
has proposed.

(7) Emphasis On Carload Freight. TSTC asks that CSX and NS be
required to conduct an
assessment for New Jersey similar to a 1995 assessment for New York,
which (TSTC claims) indicated a
substantial untapped potential for conventional carload freight. TSTC further
contends that, based on the
study results, the Board should assign both carriers specific target levels for
carload freight traffic, and
should monitor the attainment of these levels for at least 5 years.

(8) Retaining Activity in North Jersey SAA. TSTC is concerned
that cost increases in the North
Jersey SAA might encourage shippers to relocate to more remote points. Such
"dispersion" of freight
activity, TSTC claims, would have adverse effects: it would lead to increases
in truck movements; it
would violate the land use principle that calls for concentration of economic
activity in existing urban
centers; and it would result in a loss of jobs in such urban centers. TSTC
therefore asks: that we
maintain oversight for at least 5 years to ensure that rates do not
discriminate against centrally located
shippers; and that, if rates in the North Jersey SAA do rise precipitously, we
investigate and take
appropriate action.

(9) Arbitration of Freight-Passenger Disputes. TSTC argues: that
rail passenger operators can
be expected to fund incremental investments in track and signals needed to
accommodate passenger
service; and that CSX and NS must be required to negotiate reasonable
requirements for physical
facilities and operating plans. And, TSTC contends, we should establish a
formal arbitration procedure
designed to permit the speedy resolution of disputes between freight carriers
and passenger carriers.

UNITED STATES REPRESENTATIVE ROBERT MENENDEZ (NJ). Rep.
Menendez,
who represents New Jersey's 13th Congressional District, argues that the Board
should address several
issues. (1) Rep. Menendez contends: that applicants should be
required to implement adequate noise
protection for residences adjacent to rail right-of-ways; and should not be
allowed to nullify preexisting
agreements or court settlements respecting noise, or local noise ordinances.
(2) Rep. Menendez
contends: that we should insist on safety as an initial condition prior to
implementation of the
transaction; that applicants' revenues should be paid into escrow until there
are sufficient funds to finance
urgent safety improvements; and that applicants should be required to reach
satisfactory resolutions to
the trackage rights issues that have been raised by public transit entities.
(3) Rep. Menendez contends
that the Board: should require applicants to renegotiate labor contracts under
the terms of the Railway
Labor Act; and should not sanction transaction provisions that may have the
effect of providing federal
subsidies to applicants.(543) (4) Rep.
Menendez contends that the Board should demand more definite
information on the North Jersey SAA, and, in particular, should demand a
definitive operating plan:
outlining safety and capacity improvements; laying out timetables for
construction; resolving right-of-way issues for mass transit agencies and
passenger rail; and providing detailed procedures to avoid
management deadlock.(544)

UNITED STATES SENATOR ARLEN SPECTER (PA). Sen. Specter
has indicated that he
has great concerns about the CSX/NS/CR transaction's potential impact on
Pennsylvania and the entire
region. Sen. Specter notes that Conrail: provides rail services throughout
Pennsylvania on its 2,456
miles of Pennsylvania track; employs more than 8,100 Pennsylvania residents in
64 of Pennsylvania's
67 counties; purchases more than $430 million a year in goods and services
from Pennsylvania vendors;
and pays more than $30 million a year in State and local taxes. The
CSX/NS/CR transaction, Sen.
Specter contends, raises substantial issues with respect to the effects it will
have on Conrail employees,
Pennsylvania communities, shippers, the Port of Philadelphia, trucking
companies, commuter and
intercity passenger rail services, rail safety, and the environment.

Applicable Standards. Sen. Specter believes that our analysis
should rest on the premise that it is
in the public interest that Conrail's employees and Pennsylvania's communities
should be no worse off
under the CSX/NS/CR transaction than they would have been under the originally
proposed CSX/CR
transaction. Sen. Specter also believes: that the Board should review the
totality of the transaction, not
just individual aspects of it; and that, in light of the recent problems in the
West, it is important to focus
on ensuring rail safety and on whether CSX and NS can deliver on their promises
of operational
efficiencies.

Issues Raised. (1) Sen. Specter indicates that the location of
major rail lines along the riverbanks
and downtown area in the City of Pittsburgh may pose public safety risks and
may limit the development
potential of the City. (2) Sen. Specter contends that we should review whether
CSX and NS can pay
$115 per share for Conrail without either passing on that cost to shippers in
the form of higher rates
and/or cutting back on other costs (e.g., costs incurred in connection with
maintenance and safety).
(3) Sen. Specter indicates that he is troubled by reports he has
received that the New York Dock doctrine
is inadequate, both because employees may not be able to prove that their
employment was affected by
the transaction itself and not by an intervening cause, and also because the
combination of smaller
seniority districts into much larger seniority districts may require affected
employees to obtain jobs
hundreds of miles from their homes. Sen. Specter insists that, if the
transaction is approved, the Board
should impose conditions to benefit employees beyond the doctrine of New
York Dock. (4) Sen. Specter
insists that the Board must ensure that there is, in Philadelphia, a
significant headquarters presence for
Conrail or any successor entity. (5) Sen. Specter contends that the Board must
consider whether there
will be, post-transaction, sufficient competition. Sen. Specter adds that,
given the important role played
by Pennsylvania's shortlines, the concerns of these shortlines must be accorded
a high priority. (6) Sen.
Specter contends that the CSX/NS/CR transaction may alter the competitiveness
of the Port of
Philadelphia well into the next century. (7) Sen. Specter contends that public
transportation is critical to
millions of Pennsylvania residents, and that the Board, in reviewing the
CSX/NS/CR transaction, should
ensure that SEPTA obtains a new trackage rights contract that will allow
existing service to continue and
that will also provide for various new services that SEPTA is now studying.(545)

UNITED STATES SENATOR JACK REED (RI). Sen. Reed's
concerns respect the quality
and cost of freight service in New England, and the serious impact the
CSX/NS/CR transaction may have
on New England's economic livelihood; New England's shippers,
Sen. Reed warns, may face competitive
disadvantages due to the potential enhancement of freight service competition
in almost every other area
on the East Coast. The importance of the freight rail component of the
transportation infrastructure,
Sen. Reed adds, is made clear by the over $100 million investment that
Rhode Island, in conjunction
with the Federal Railroad Administration, has made to modernize Rhode Island's
freight rail system and
to develop the former Quonset Point Navy Base as a world class port facility.
Sen. Reed argues: that
New England should be afforded the same form of competition between two
Class I railroads as the
New York/New Jersey area is expected to receive; that serious
consideration should be accorded to the
conditions requested by RIDOT; and that action should be taken to ensure that
planned infrastructure
improvements to the Albany-Boston line continue so that New England
shippers can benefit from
modern freight rail services such as double stack and tri-level carrier
clearances. Sen. Reed also urges
the creation of a mechanism that would allow the Board to review the impacts of
the CSX/NS/CR
transaction and to take steps when necessary to ensure nationally competitive
rail service in terms of cost
and quality for New England's ports and businesses.

VILLAGE OF RIDGEFIELD PARK, NEW JERSEY. The interests of
the Village of
Ridgefield Park, NJ (the Village), are focused on CSX's Sub-No. 8 proposal to
construct, at Little Ferry,
NJ, two connections between Conrail's Selkirk-North Bergen line and NYS&W's
Paterson-Croxton line.
The Village contends: that traffic on these connections, which will be
constructed within the Village,
will cause prolonged blocking of two thoroughfares (Mt. Vernon Street and the
Bergen Turnpike), and
will split the Village into two sectors; that such blockages will negatively
affect a number of large
industries located west of the tracks; and that, because a Department of Public
Works yard (at which fire
trucks and ambulances are repaired and fueled) is also located west of the
tracks, the untimely blocking
of Mt. Vernon Street and/or the Bergen Turnpike could make the difference
between life and death in the
event of a serious fire or other emergency. The Village concedes that the
blocking problem it fears is
already, in some measure, a reality, because, even at present, operation within
the Village of NYS&W's
refueling facility has been known to block the crossings at Mt. Vernon Street
and/or the Bergen Turnpike
for as much as 20 minutes to 1 hour at a time. The Village adds,
however, that the new connections will
make the present situation even worse.(546)
The Village therefore contends: (a) that CSX should be
required to construct the connections elsewhere;(547) (b) that NYS&W should be required
to remove its
refueling facility from the Village;(548) and
(c) that applicants should be required to make the Conrail
drawbridge over the Hackensack River moveable again, so that water traffic may
once again navigate
Overpeck Creek.(549)

APPENDIX J: REGIONAL/LOCAL INTERESTS IN THE
MID-ATLANTIC

BALTIMORE AREA TRANSIT ASSOCIATION. BATA, a citizens
group located in the
Baltimore, MD, area, is concerned that the increases in freight traffic
anticipated by CSX and NS may
interfere with the passenger services now operated by MARC and Amtrak. BATA
therefore urges the
Board to place on CSX and NS "rules of access" intended to protect passenger
rail options in the
Baltimore area by allowing local transportation authorities access to
Baltimore-area rail facilities.

CITIZENS ADVISORY COMMITTEE (BALTIMORE REGION). The
Baltimore Region's
Citizens Advisory Committee (CAC)(550)
contends: (1) that, to ensure that the Port of Baltimore is not
disadvantaged vis-à-vis the Ports of Philadelphia and New York, CSX and
NS should be required to
provide for shared facilities throughout the Port of Baltimore; (2) that, to
create a second routing to the
West, CSX should be required to grant, to the Maryland Midland (MM) and NS,
either track or trackage
rights sufficient to create an MM/NS link between Hagerstown, MD, and the Port
of Baltimore; (3) that,
to ensure that coal producers in Western Maryland are not disadvantaged
vis-à-vis coal producers on
Conrail's MGA lines, the coal producers in Western Maryland should be afforded
competitive rail
service, including alternate routes east to Baltimore over CSX and W&LE/MM;
(4) that, to create a
comparatively direct single-line connection to Canada, D&H should be
granted access to the Port of
Baltimore, provided that the Northeast Corridor can handle the additional
traffic; and (5) that, because
CSX and NS envision increased freight traffic on their lines, we should ensure
that the passenger
operations now conducted by the Maryland Rail Commuter Service (MARC) and by
Amtrak will be able
to continue at not less than their pre-transaction levels.

DELAWARE DEPARTMENT OF TRANSPORTATION. DEDOT is generally
supportive of
the CSX/NS/CR transaction but has raised several issues. (1) DEDOT, which is
concerned that the Port
of Wilmington will be placed at a disadvantage vis-à-vis the Ports of
Baltimore, Philadelphia, and New
York, asks that we either: (a) extend the South Jersey/Philadelphia
SAA south to the Port of
Wilmington; or (b) allow CSX to provide rail service to the Port of
Wilmington. (2) DEDOT, which
notes that there are, in the City of Newark, DE, three at-grade crossings at
busy streets that are also major
regional arteries, asks that we require: that, on this line, CSX must adhere
to the maximum number of
trains noted in its operating plan; that, if the average daily number of trains
increases above the level
beyond which a detailed environmental analysis would have been required in this
proceeding, CSX must
complete a comprehensive environmental analysis; and that grade-separated
pedestrian crossings and the
construction of a fully grade-separated railroad roadway crossing must be
included as potential
mitigation measures in this analysis. (3) DEDOT is concerned that
post-transaction freight traffic
increases: may adversely impact the rail passenger services now provided by
Amtrak (on the Northeast
Corridor) and by SEPTA (between Newark and Philadelphia, under contract to the
Delaware Transit
Corporation); and may complicate the establishment of rail passenger service on
Conrail's New Castle
and Delmarva Secondary lines. DEDOT therefore asks: that we address such
matters as dispatching,
maintenance, and capital investments, in order to ensure that rail passenger
services will be able to
continue and to develop; and that we stipulate that NS (to which Conrail's
Delaware lines will be
assigned) either provide or not unreasonably withhold operating rights to the
State of Delaware for the
purpose of reintroducing passenger service along its entire system including
the New Castle and
Delmarva Secondary lines. (4) DEDOT notes: that, because most Delaware
shortlines intersect with
Conrail's Delmarva Secondary, an intra-peninsula system connecting these
shortlines could be created;
and that such a system, by allowing the shortlines to move equipment between
their lines, would thereby
allow for a viable alternative to motor carriers for local freight flows.
DEDOT therefore asks that we
provide operating rights along the Delmarva Secondary to Delmarva Peninsula
shortlines for the purpose
of hauling local rail freight.

WEST VIRGINIA ASSOCIATION FOR ECONOMIC DEVELOPMENT. WVED,
an ad
hoc organization interested in the promotion of competitive rail service in
West Virginia, is concerned
about future access to Conrail's West Virginia Secondary, which enters
West Virginia at Point Pleasant,
WV (at the junction of the Kanawha River and the Ohio River), which extends
into West Virginia for
roughly 149 miles to Cornelia, WV, and which provides (either directly or
via shortline connections) a
vital link for several industrial facilities (most importantly, several
chemical plants) and also for
numerous coal mines. WVED claims, in essence, that these facilities and mines,
which are (WVED
insists) captive to Conrail pre-transaction and which will therefore be captive
to NS post-transaction,(551)
will be adversely impacted by the new competitive options that will exist
post-transaction in the two
New Jersey SAAs and along Conrail's MGA lines. WVED contends that, to
"even the playing field" and
to avoid harmful distortions in secondary markets, we should require NS to
grant CSX shared use of the
West Virginia Secondary similar to the shared use that applicants will
enjoy in New Jersey and on the
MGA lines.

WEST VIRGINIA STATE RAIL AUTHORITY. WVSRA supports
approval of the
CSX/NS/CR transaction, subject to certain modifications. (1) WVSRA
contends that, in order to keep
W&LE alive as a viable competitor, the transaction should be restructured
to allow for access by W&LE
to the West Virginia market. (2) WVSRA contends that the transaction, by
creating new competition in
the MGA coal fields while preserving the CSX monopoly in the B&O coal
fields (in north central West
Virginia), will place the B&O producers at a competitive disadvantage.
WVSRA therefore asks that we
require that NS be granted trackage rights access to the B&O coal fields.
(3) WVSRA asks that we
require that CSX be granted trackage rights on the West Virginia Secondary,
between Point Pleasant and
Charleston. (4) WVSRA asks that we approve an interconnection between the
TERRI line at Falling
Rock, WV, and the Conrail line in Charleston, WV, with a joint service
opportunity with CSX and NS.
(5) WVSRA asks that we institute an oversight proceeding to ensure that West
Virginia's industries and
jobs are not put in jeopardy by transaction-related service failures.(552)

APPENDIX K: REGIONAL/LOCAL INTERESTS IN THE
MIDWEST

BAY VILLAGE, ROCKY RIVER, AND LAKEWOOD, OH. The Cities of
Bay Village,
Rocky River, and Lakewood, OH (the BRL Cities) ask that we adopt as conditions
the terms of the
memorandum of agreement entered into on June 2, 1998, with NS.(553)

CITY OF CINCINNATI, OH. The City of Cincinnati contends
that the Indiana & Ohio
Railway Company (IORY) should not be granted trackage rights over NS'
Riverfront Running Track in
Cincinnati. The City claims that operation of trains over this out-of-service
line by IORY or, indeed, by
any railroad would have a material adverse impact on public safety and on a
number of city, county, and
state projects now underway in Cincinnati.(554)

CITY OF CLEVELAND, OH. The City of Cleveland asks that we
adopt as conditions: the
terms of the memorandum of agreement entered into on May 22, 1998, with NS; and
the terms of the
settlement agreement entered into on June 4, 1998, with CSX, both approved by
the Cleveland City
Counsel on June 8, 1998.(555)

CITY OF GEORGETOWN, IL. With respect to the
Paris-Danville abandonment noticed in
STB Docket Nos. AB-167 (Sub-No. 1181X) and AB-55 (Sub-No. 551X),
the City of Georgetown has
requested a 180-day public use condition and has also filed a Trails Act
statement.(556)

CITY OF INDIANAPOLIS, IN. The City of Indianapolis: has
indicated that its concerns vis-à-vis the CSX/NS/CR transaction have
been resolved by a settlement agreement (the Indianapolis
agreement) it entered into as of June 1, 1998, with CSX; and has withdrawn its
request for conditions, on
the further condition that we make approval of the transaction subject to the
terms of the Indianapolis
agreement. See CI-9 (filed June 2, 1998).(557) The Indianapolis agreement provides:(558) (1) that CSX will
switch for NS to/from any industries that locate, in the future, on the former
Indianapolis Union Belt
Railroad; (2) that, in the first 5 years, the switching charge will not exceed
the lesser of (i) the switching
cost determined by a joint CSX/NS cost study, subject to RCAF-U adjustments, or
(ii) $250 per car,
subject to RCAF-U adjustments; (3) that the City may appoint an independent
auditor to be involved, as
its representative, in the cost study; (4) that CSX will negotiate with NS
to allow NS to build, for its
exclusive use and at its own expense, trackage at Hawthorne Yard; (5a) that CSX
will offer, for 10 years,
a terminal switch charge for freight moving between the Central Railroad of
Indiana, the Louisville &
Indiana Railroad Company, and the Indiana Southern Railroad, Inc.;
(5b) that CSX will offer, for 10
years, a special switch charge for traffic originating or terminating on one of
those shortlines and
interchanged with NS, if that traffic cannot receive single-line service from
CSX; and (6) that, if existing
Conrail-served shippers who would otherwise be open to switching access to NS
under the Transaction
Agreement but whose Conrail contracts will be allocated to CSX are dissatisfied
with the service they
receive from CSX, they may avail themselves of an arbitration procedure,
similar to that prescribed in
the NITL agreement, with a view to rebidding their traffic to other carriers.

ENVIRONMENTAL LAW & POLICY CENTER OF THE MIDWEST.
EL&PC, an
environmental group that supports the concept of a Midwest High-Speed Rail
Network connecting
Chicago to Detroit, St. Louis, Minneapolis, and Cincinnati, asks that we
consider four issues.
(1) EL&PC asks that we ensure that existing rights-of-way and the
track thereon are preserved for future
passenger rail service. (2) EL&PC asks that we ensure that CSX and NS
address, in their capital plans,
the "bottleneck" that has so often delayed passenger trains approaching Chicago
from the east via the
south end of Lake Michigan. (3) EL&PC asks that we ensure: that
passenger service has primacy, as
intended by Amtrak's enabling legislation; and that CSX and NS preserve
passenger access to their tracks
even if Amtrak is not able to use such tracks. EL&PC adds that, if Amtrak
is unable to use such tracks,
the rights of primary access should be transferrable to the State Departments
of Transportation or any
other party designated by Amtrak. (4) EL&PC asks that we ensure that CSX
and NS are capable of
effectively maintaining and operating Conrail's assets. Worsened congestion
east of the Mississippi
River, EL&PC fears, could so erode Amtrak's ridership as to bankrupt the
organization.

FOUR CITY CONSORTIUM (NORTHWESTERN INDIANA). The Four
City Consortium
(FCC), an association of the Northwestern Indiana Cities of East Chicago,
Hammond, Gary, and
Whiting, has focused primarily on the two features of the CSX/NS/CR transaction
that (FCC believes)
will have the worst impacts: (1) the significant increases in rail
traffic over certain rail lines that have
numerous rail/highway grade crossings, in particular the B&OCT line between
Calumet Park, IL, and
Pine Jct., IN; and (2) the reinstitution by CSX of rail service on the now
out-of-service NS line between
Clarke Jct., IN, and Hobart, IN. FCC has submitted a two-pronged Alternative
Routing Plan that, it
claims, would: accommodate applicants' planned increases in rail traffic;
minimize disruptions to
applicants' planned post-transaction rail flows; concentrate, to the extent
practicable, rail traffic on lines
that are grade separated and/or have a lower incidence of rail/highway grade
crossings; result in
quantifiable cost savings to the public and also to applicants; and greatly
mitigate the safety,
socioeconomic, and environmental impacts, including environmental justice
impacts, that the
CSX/NS/CR transaction will otherwise have in the Four Cities region.

The first prong of the Alternative Routing Plan would reroute some CSX
traffic from the
B&OCT/CSX Calumet Park-Pine Jct.-Willow Creek route to an IHB/Conrail
Calumet Park-Ivanhoe-Tolleston-Gary-Willow Creek route. The IHB/Conrail route
would involve: IHB's grade-separated
Calumet Park-Ivanhoe-Tolleston-Gary line; Conrail's (hereafter, CSX's)
Gary-Willow Creek line; and a
new connection in Gary. FCC claims: that the B&OCT/CSX route has
27 rail/highway grade crossings,
20 of which are located on B&OCT's Calumet Park-Pine Jct. line and are
already the cause of much
vehicle delay and many safety problems; and that the IHB/Conrail route runs
through a less developed
area with only 15 grade crossings, and would take advantage of the $25 million
in government funds
already invested in grade separations on the IHB corridor.

The second prong of the Alternative Routing Plan would reroute certain CSX
traffic from NS'
(hereafter, CSX's) Clarke Jct.-Hobart line to an EJ&E/NS Pine Jct.-Van
Loon-Hobart route. The
EJ&E/NS route would involve: EJ&E's Pine Jct.-Van Loon line; and NS'
Van Loon-Hobart line. FCC
notes that the Clarke Jct.-Hobart line cuts through the heart of Gary, has
been out of service for roughly
10 years, and has 23 (now inactive) rail/highway grade crossings; and FCC
claims that reinstitution of
service on this line will create massive safety problems, and will interfere
with expansion plans for the
Gary/Chicago Airport, a Gary housing project, and lakefront development efforts.

Conditions Requested. FCC contends that, if we approve the
CSX/NS/CR transaction, we must
impose conditions to mitigate adverse impacts on the Four Cities region. (1)
Condition #1 would require
the adoption of the Alternative Routing Plan in at least two respects.
Condition #1a: would require CSX
to reroute its traffic off of B&OCT's Calumet Park-Pine Jct. line in at
least sufficient numbers so that no
more than 27.6 trains per day on a monthly average basis would traverse this
line; and would require, to
the extent possible, that trains rerouted off this line move over the
grade-separated IHB/Conrail Calumet
Park-Ivanhoe-Tolleston-Gary-Willow Creek route. Condition #1b: would
require that the Clarke Jct.-Hobart line not be restored to service; and would
require applicants to utilize instead either (i) the
EJ&E/NS Pine Jct.-Van Loon-Hobart route, or (ii) any other route applicants
prefer, provided that the
Four Cities concur. (2) Condition #2 would provide that, absent agreement
between NS and FCC: no
more than 16 trains per day on a monthly average basis will be operated over
NS' Van Loon-Hobart line;
and no more than 11 trains per day will be operated over NS' Burnham Yard-Van
Loon line.(559) (3)
Condition #3 would require CSX and NS to work with FCC to develop additional
plans to mitigate
transaction-related impacts in Northwestern Indiana; and would specifically
require CSX and NS to
cooperate in seeking state and federal funding to facilitate the maximum
utilization of grade-separated
corridors, and to work with the City of Gary to facilitate the future expansion
of the Gary/Chicago
Airport. (4) Condition #4 would require CSX and NS to report to FCC at
least quarterly, and would
require their reports to contain sufficient information to confirm compliance
with Conditions #1, #2, and
#3. (5) Condition #5 would provide for Board oversight for 5 years
to ensure compliance with
Conditions #1, #2, #3, and #4.

ILLINOIS DEPARTMENT OF TRANSPORTATION. ILDOT acknowledges
that the
CSX/NS/CR transaction will generally benefit Illinois but asks that we modify
the transaction in two
respects.

The Sub-No. 9 CSX/BRC Connection. ILDOT claims, apparently with
respect to the project
noticed in STB Finance Docket No. 33388 (Sub-No. 9), that the
construction of a CSX/BRC connection
at 75th Street in Chicago will result in placing new diamonds across a
track shared by NS freight trains
and Chicago Metra commuter trains. ILDOT believes that, because CSX can easily
reach BRC's yard at
Bedford Park via existing connections or by utilizing Conrail tracks, there is
no justification for running
the risk that would be inherent in establishing yet another crossing point for
freight traffic and commuter
traffic.

Chicago Switching District Traffic Flows. ILDOT contends: that
the operation of the Chicago
switching district depends upon the unimpeded interchange of traffic between
carriers, which in large
part depends upon the existence of more-or-less neutral switching carriers;
that the allocation of assets
contemplated by applicants will give CSX and NS effective control of the three
major switching carriers
in the Chicago area; that it appears that one of these carriers, IHB, will
de-emphasize its role as a
switching carrier, and will become an extension of the mainlines of CSX and NS;
that, in addition, large
portions of the Chicago switching district will become dependent on CSX
dispatching, which has been
problematic for some time; and that, aside from NS, other carriers will be
hampered by the consolidation
of power over switching in the hands of CSX. ILDOT, citing the problems that
developed in the
Houston terminal in 1997, insists that it is vital that both CSX and NS
continue to have free access not
only to the two major western carriers and the two Canadian carriers but also
to smaller railroads such as
WCL, IC, and EJ&E. ILDOT therefore contends that, to preserve IHB as a
neutral connection and to
continue the free flow of traffic through the Chicago switching district,
Conrail's 51% interest in IHB
must be transferred to a neutral carrier or a group of neutral carriers.

ILLINOIS INTERNATIONAL PORT DISTRICT. The Illinois
International Port District
(the Port of Chicago), which operates a port facility known as Calumet Harbor,
the tracks at which are
owned by NS, indicates: that the two sides of Calumet Harbor (which we shall
refer to as Calumet
Harbor West and Calumet Harbor East) have independent rail service; that, at
Calumet Harbor West, the
Chicago, South Shore and South Bend Railroad (CSS&SB), the Chicago Rail
Link (CRL), and the
Indiana Harbor Belt Railway (IHB) have operating rights over the NS tracks; and
that, at Calumet Harbor
East, NS has exclusive operating rights. The Port of Chicago claims: that,
due to the lack of competition
at Calumet Harbor East, the Port of Chicago has been unable to offer, at
Calumet Harbor East, services
competitive with those offered at Calumet Harbor West and at other ports
throughout the country; and
that the CSX/NS/CR transaction will aggravate the already bad situation at
Calumet Harbor East,
because NS plans to reduce service at, and in due course to eliminate, the
nearby Calumet Yard (at which
NS now provides classification service for traffic moving from/to Calumet
Harbor East), and to transfer
the Calumet Yard classification functions to Elkhart, IN, some 70 miles away.
The Port of Chicago
therefore requests that we impose either or both of two conditions, which are
intended to promote
competition at Calumet Harbor East, and to allow the Port of Chicago to compete
more effectively with
East Coast and other Great Lakes ports. Condition #1 would require NS to
grant, to CSS&SB and CRL,
operating rights over NS' trackage at Calumet Harbor East. Condition #2, which
is intended both as an
alternative and a supplement to Condition #1, would require NS to grant, to
CSX, operating rights over
NS' trackage at Calumet Harbor East.

INDIANA PORT COMMISSION. IPC's interests are focused upon
its International Port of
Indiana, known as Burns Harbor, which is located at Portage in Porter County,
IN, some 10 miles east of
Gary, IN, on the southeastern shore of Lake Michigan. IPC has asked us to
impose a number of
conditions.

IHB Conditions. IPC contends: that, with the CSX/NS/CR
transaction, IHB will be exploited by
CSX and NS, and will be relegated to the role of a switching railroad; that the
potential for an annual
change in IHB management will lead to instability; that, therefore, it would be
better if some or all of
Conrail's IHB stock were divested or placed in a perpetual voting trust; and
that a neutral carrier or group
of carriers should be allowed to control IHB and to run IHB in a
nondiscriminatory manner.(560) IPC
further contends that we should order: that IHB must continue to provide at
least daily service to Burns
Harbor; that IHB must be permitted to retain its ownership interests in the
nearly 1,500 gondola cars
bearing its markings; that such gondola cars, when interlined with CSX and NS,
must be returned empty
at the junction points where they were delivered; and that IHB's Blue Island
and Michigan Avenue Yards
must remain under IHB control. And, IPC adds, we should: retain jurisdiction
for at least 5 years to
monitor implementation of the transaction; require CSX and NS to file periodic
reports detailing their
stewardship of IHB; and afford interested persons the opportunity to respond to
such reports.(561)

Service Adequacy Conditions. IPC contends that we should:
prescribe service standards; require
applicants to prove, by submission of periodic reports, that they are complying
with the prescribed
standards; and restrain applicants from implementation of any changes in
presently existing services in
the affected area until such time as it is clear that prescribed service
standards are being maintained
consistently and reliably.

Economic/Financial Conditions. IPC asks that we ascertain that
the CSX/NS/CR transaction
will not lead to avoidable financial debacles, and, if necessary, impose
conditions intended to preclude
the occurrence of financial adversity and the need for otherwise unnecessary
rate increases.

Additional Conditions. IPC contends: that our decision approving
the transaction should be
made effective no sooner than 30 days after the date of service, and should
provide for an orderly
implementation of the transaction; and that applicants should be required to
file, before the effective date
of our decision, a timetable setting out, by specific locations and identified
routes, the sequential phasing
in of Conrail into CSX and NS.

OAG, ORDC, & PUCO (OHIO). The Ohio Attorney General
(OAG), the Ohio Rail
Development Commission (ORDC), and the Public Utilities Commission of Ohio
(PUCO) maintain that
the CSX/NS/CR transaction is not in the public interest and should be denied
because: W&LE and AA
will be confronted with substantial losses of traffic and revenue that will
threaten W&LE's solvency and
AA's ability to provide essential service; Centerior, Wyandot, NL&S, and MM
will be deprived of
single-line service;(562) ASHTA will be
burdened with unnecessarily circuitous and inefficient movements
of its hazardous chemical traffic; the Neomodal facility will face extinction
if its only rail connection
(W&LE) should fail; the re-routings contemplated by applicants will create
adverse impacts throughout
Ohio; and a number of Ohio-based rail employees will face the prospect of
losing their jobs or of being
transferred out of Ohio. OAG, ORDC, and PUCO add that the transaction should
be approved only if
approval is made subject to "at least" (OAG-9 at 5) the protective measures
specified in their OAG-9
brief.

(1) OAG, ORDC, and PUCO argue: that the future of W&LE, a vital
regional railroad, will be
jeopardized if the transaction is implemented without appropriate conditions;
that a W&LE bankruptcy
would be particularly disruptive for major Ohio rail users; that the collapse
of W&LE would isolate the
Neomodal facility and foreclose this project from ever becoming a key component
in the Ohio
transportation system;(563) and that, for
these reasons, we should adopt conditions adequate to assure that
W&LE can remain fully intact as a regional carrier. OAG, ORDC, and PUCO
add: that they are
committed to W&LE's request for haulage/trackage rights access to
industries and facilities in and
around Toledo; and that direct interchange between W&LE and AA would allow
each to recover
revenues that it would otherwise stand to lose as a result of the transaction.

(2) OAG, ORDC, and PUCO argue: that the promotion, by CSX and NS, of
intermodal
terminals in the Cleveland area will adversely impact the Neomodal facility;
that, at the same time,
increased truck traffic in the Cleveland area will add to that area's worries
in terms of air pollution and
noise and added burdens on the railroad infrastructure; and that, for these
reasons, we should adopt
conditions adequate to assure that utilization and viability of the Neomodal
facility will not be
undermined as a result of the CSX/NS/CR transaction.

(3) OAG, ORDC, and PUCO argue: that the CSX/NS/CR transaction will
arbitrarily skew the
local electric generating market against Centerior (as its single-line hauls
become joint-line hauls, and as
certain of its competitors enjoy new rail competition); that, as respects the
shift from single-line service
to joint-line service, the NITL agreement provides no more than a 3-year "stay
of execution"; and that, to
promote a level playing field, we should assure Centerior of the continued
availability of single-line
service by obligating NS to assume trackage rights over the CSX line (now a
Conrail line) between
Centerior's Lake Shore Station located in Cleveland and CP 124 located
east of Ashtabula.

(4a) OAG, ORDC, and PUCO contend: that the CSX/NS/CR transaction threatens
serious
"single-line to joint-line" impacts in Ohio; that the harms shippers such as
Wyandot, NL&S, and MMM
will suffer will not be mitigated by the NITL agreement, which does not address
service inefficiency
questions and which will provide, at most, a 3-year transition period; that
there will be social costs as
well (i.e., more wear-and-tear on highways and more air pollution, because some
traffic that now moves
by rail will henceforth be diverted to truck); and that we should therefore (i)
impose conditions adequate
to preserve the service and pricing elements of the single-line service
currently available to Ohio
aggregate shippers, and (ii) grant in full the relief sought by Wyandot,
NL&S, and MMM

.

(4b) OAG, ORDC, and PUCO argue: that AA provides essential rail services
in Northwestern
Ohio; that, however, AA's future is in jeopardy, because AA stands to lose
substantial revenues as a
result of the CSX/NS/CR transaction; and that we should impose conditions
adequate to ameliorate the
adverse impact of a loss of traffic on AA's ability to provide adequate service.

(5) OAG, ORDC, and PUCO contend that we should prescribe reciprocal
switching between
CSX and NS at Ashtabula to avoid circuitous (via Buffalo) and inefficient
(i.e., joint-line) handling of
ASHTA's hazardous chemical traffic.

(6a) OAG, ORDC, and PUCO contend that we should impose a condition
requiring that
applicants may not effect substantial increases in traffic over Ohio corridors
and/or through Ohio
communities without first having negotiated and committed to agreements with
State and local officials
to mitigate the adverse safety and environmental impacts that will otherwise
occur.

(6b) OAG, ORDC, and PUCO contend that we should carefully consider the
impact of the
CSX/NS/CR transaction on affected employees and on the State, and should impose
the highest level of
labor protection as appropriate in the circumstances.

(7) OAG, ORDC, and PUCO contend that we should adopt pro-active oversight
provisions to
monitor implementation of the CSX/NS/CR transaction. OAG, ORDC, and PUCO add:
that oversight
should extend for at least 5 years; that we should assure that trackage rights
agreements between
applicants are operated in the interest of shippers; that we should impose
periodic reporting requirements
concerning adequacy of service, environmental, safety, and competitive issues;
that we should retain
authority to request additional information from applicants or any other party
of record; that we should
retain jurisdiction to assure that corridor and other safety and environmental
mitigation agreements are
fully implemented, and to ensure full compliance with employee protection
conditions; that appropriate
provision should be made for active participation by the Federal Railroad
Administration and state
agencies authorized to review and enforce safe railroad practices; that we
should establish a schedule
pursuant to which we will respond to progress reports; and that we should
ensure that all concerned
parties have access to effective post-transaction relief.

PARKS/RECREATION DEPT. OF ST. JOSEPH COUNTY, IN. With
respect to the South
Bend-Dillon Junction abandonment noticed in STB Docket No. AB-290 (Sub-No.
194X), the St. Joseph
County Parks and Recreation Department has requested a 180-day public use
condition and has also filed
a Trails Act statement.(564)

STARK DEVELOPMENT BOARD. SDB's interests in this
proceeding are focused upon its
Neomodal Terminal,(565) an intermodal terminal
located on a W&LE line in Stark County, OH, that was
developed with funds awarded by the Federal Highway Administration (FHWA) and
the Ohio
Department of Transportation (OHDOT). SDB, a non-profit corporation organized
to provide a new
approach to handling economic development in Stark County, claims that
Neomodal: was built on a
W&LE line because W&LE connects with three Class I railroads (CSX, NS,
and Conrail); was meant to
facilitate competitive intermodal rail service to Northeast Ohio and Western
Pennsylvania; and was
intended to take truck traffic off the highways, thereby reducing air pollution
and saving millions of
gallons of diesel fuel. SDB fears, however, that Neomodal will be adversely
impacted by the
CSX/NS/CR transaction. SDB claims, in fact, that the transaction, if not
properly conditioned, will
eliminate W&LE and Neomodal, and will thereby eliminate effective rail
competition in Northeast Ohio.
The main problem (as SDB describes it) is that the post-transaction CSX and the
post-transaction NS will
prefer to work with intermodal facilities located on their own lines. SDB
claims that the anticipated
construction of new terminals by CSX and NS: will result in the creation of
redundant facilities (i.e.,
Neomodal will be made redundant); will lead to predatory pricing and business
practices which, in turn,
will lead to an undue concentration of market power in the Northern Ohio
corridor; and will be
detrimental to public health and safety (because the lack of rail competition
will force Northeast Ohio
shippers to use over-the-road trucking). SDB insists that, in view of the
environmental issues, the safety
issues, the economic development issues, the competitive issues, and the
political issues, and in order to
allow Neomodal to continue to succeed as originally intended (i.e., on a viable
W&LE), certain remedies
must be imposed. See SDB-11 at 31-32.(566)

Conditions Requested. SDB requests that we issue the following
protective conditions: (1)
mandate that CSX and NS provide competitive pricing and rates, competitive and
reliable scheduling,
reliable and timely service, and access to markets; (2) mandate that CSX and NS
work with W&LE to
insure competitive pricing and rates, competitive and reliable scheduling, and
reliable and timely service;
(3) mandate that CSX and NS integrate Neomodal into their respective rail
systems and market
Neomodal as if it were their own terminal; (4) mandate that CSX and NS enter
into long-term (at least 10
years) "take or pay" lift contracts with Neomodal, at a minimum level of 15,000
lifts per year; and (5)
grant to W&LE trackage rights to Chicago, IL, and unrestricted trackage
rights to Hagerstown, MD, with
expressed guarantees and remedies.

Alternative Relief. SDB contends that, if we do not grant the
conditions it has requested, we
should require CSX and/or NS: (a) to purchase Neomodal and its assets, at
their fair market value, as
determined by appraisal; and (b) to integrate Neomodal into their respective
rail systems in a manner that
would continue competitive rail service to Northeast Ohio and Western
Pennsylvania.

SUMMIT COUNTY PORT AUTHORITY. SCPA's interests are
focused upon an 8-mile gap
in the trackage rights requested by W&LE on CSX's New Castle Subdivision in
Akron, OH, and on
Conrail's lines in the area east of Akron. See WLE-4 at 54 n.3 and
77. SCPA, an authority created under
Ohio law by Summit County, argues: that it owns the lines (the Freedom
Secondary between Kent and
Akron, and the Akron Secondary between Hudson and Cuyahoga Falls) that make up
the 8-mile gap; and
that, because it is not an applicant in this proceeding, we cannot, in this
proceeding, award trackage
rights over these lines or otherwise alter any interests in these lines.

TLCPA & TMACOG (TOLEDO, OH). The Toledo-Lucas County
Port Authority (TLCPA)
and the Toledo Metropolitan Area Council of Governments (TMACOG) support the
CSX/NS/CR
transaction but ask that their letter agreement with NS be made part of the
record in this proceeding.(567)

UNITED STATES REPRESENTATIVE DENNIS J. KUCINICH (OH).
Rep. Kucinich
asks(568) that we adopt as conditions: the
terms of the memorandum of agreement entered into by the BRL
Cities and NS; and the terms of a letter agreement entered into by the City of
Berea, NS, and CSX.(569)

VILLAGE OF RIVERDALE, IL. The Village of Riverdale, a
community in Cook County, IL,
believes that it will be adversely impacted by a transaction-related reduction
in rail employment in the
Chicago Metropolitan Area.

APPENDIX L: LABOR PARTIES.

ALLIED RAIL UNIONS. The American Train Dispatchers
Department/BLE, the Brotherhood
of Maintenance of Way Employes, the Brotherhood of Railroad Signalmen, the
International
Brotherhood of Electrical Workers, the Sheet Metal Workers' International
Association, and the
Transport Workers Union of America, participating collectively as the Allied
Rail Unions (ARU),(570)
contend that the CSX/NS/CR transaction should be rejected: because of its
adverse effects on rail
employees,(571) on the Railroad Retirement
system, on the safety and adequacy of railroad operations, and
on competition in the Northeast; and because applicants have not demonstrated
that there will be
sufficient public benefits to justify approval of the transaction given its
adverse impacts and given also
that Conrail currently provides adequate service.

Declarations Requested. ARU contends that, if we approve the
transaction, we should issue
declarations: (1) that current rates of pay, rules, and working
conditions, and other rights, privileges, and
benefits of applicants' employees under their CBAs, must be preserved;
(2) that action at odds with
existing CBAs may be taken only upon proof that such action is "necessary" (in
the ordinary usage of
that word) to the acquisition of control, and division, of Conrail; (3) that
applicants have not
demonstrated any necessity for overriding any CBA terms; and (4) that
Board approval of the transaction
does not constitute explicit or implicit endorsement of applicants' plans to
abrogate or modify existing
CBAs.

Why These Issues Must Be Addressed. (1) ARU contends that we
must: identify the areas of
potential conflict between the RLA and the ICCTA; craft our decision so as to
prevent or minimize such
conflict; and justify any inability to avoid such conflict. (2) ARU
contends that, despite years of
litigation, the law respecting potential conflict between New York
Dock, Art. I, § 2 and New York Dock,
Art. I, § 4, and between the RLA and the ICCTA, remains unclear.
(3) ARU contends that, pursuant to
recent ICC/STB decisions, the Board and its arbitrators are now micro-managing
rail industry labor
relations by providing government sanction for carrier-initiated CBA changes.
ARU claims: that this
unprecedented regulation of labor has been destructive to labor relations in
the railroad industry; and
that, given the scope of the CSX/NS/CR transaction, failure to deal with ARU's
issues will extend that
destruction to most rail workers east of the Mississippi.

ARU's Analytical Framework. ARU would minimize conflicts between
New York Dock, Art. I,
§ 2 and New York Dock, Art. I, § 4 (and, similarly,
between the RLA and the ICCTA) by according a
broadly expansive reading to Art. I, § 2 and by according a narrowly
literal reading to, and by imposing a
stringent necessity predicate on, Art. I, § 4.

ARU's Constitutional Issues. ARU contends: that employees' CBA
rights are property rights,
which may not be taken for the private benefit of applicants; that these rights
may be taken for a public
purpose, but only if just compensation is provided; and that employees may not
be deprived of these
rights by federal action without due process of law. ARU further contends
that, if the CSX/NS/CR
transaction follows the pattern established in past cases: the Board, in
approving the transaction, will not
determine whether any particular CBA overrides are necessary, but will instead
assume that such
determinations will be made by implementing agreement referees; the referees,
in New York Dock, Art.
I, § 4 arbitration, will not make such determinations either, but
will instead defer to the Board's approval
of the transaction; such determinations, therefore, will not be made at all;
and employees will be
deprived of their CBA rights without any determination that a CBA override is
necessary (and, for this
reason, without due process of law). And, ARU adds, such takings of employees'
CBA property rights:
will be for a private purpose (to allow applicants to pay off their acquisition
indebtedness) and will be
uncompensated (ARU insists, in essence, that the New York Dock
conditions cannot be regarded as the
quid pro quo for such takings, because such conditions are premised upon the
assumption that rates of
pay, rules, working conditions, and other CBA rights will be preserved).

D&H Labor Protection. ARU contends that the CSX/NS/CR
transaction will have a serious
impact on employees of the D&H, and that, for this reason, D&H
employees must be covered by the
New York Dock protections imposed in this proceeding.

ARU's Voting Trust Petition. The CSX/NS Voting Trust was created
to prevent CSX and NS
from exercising control of Conrail pending review by the Board of the CSX/NS/CR
application. ARU
argues, however, that, despite the voting trust, CSX and NS have already
acquired control of Conrail
without prior Board approval. See ARU-6 (petition filed July 18,
1997). Seealso CSX/NS-31 (response
of CSX and NS, filed July 28, 1997) and CR-5 (response of Conrail, also filed
July 28, 1997). ARU
argues, in essence: that, by its very nature, the voting trust could not
insulate CSX and NS from control
of Conrail; that, at best, a voting trust can neutralize the voting power of
particular shareholders, but
cannot neutralize the real source of operational control (the directors); that,
therefore, a voting trust
cannot insulate the owners of a corporation from control thereof; that,
furthermore, the fiduciary
obligations of the trustee and the directors ensure that, despite the voting
trust, the interests of the
shareholders are paramount; that, in any event, the terms of the agreement that
governs the CSX/NS
Voting Trust have enabled CSX and NS to wield significant control over CRR;
that, as a practical matter,
CSX and NS have had complete control over CRR's day-to-day operations; and that
the practicalities of
business relationships and human nature have ensured that CSX and NS have had
control of CRR. ARU
has therefore asked that we order divestiture. ARU has asked, in the
alternative: that we declare that
CSX and NS have indeed acquired control of Conrail without prior Board
approval; and that we impose
employee protective conditions as of April 10, 1997 (the date, ARU claims, on
which CSX and NS
acquired control of Conrail).

INTERNATIONAL ASSOCIATION OF MACHINISTS. IAM, which warns
that the
CSX/NS/CR transaction will have an adverse effect upon the employees it
represents, insists: that we
must rely on applicants' 1995 Labor Impact Exhibit, which projects that 173
machinist jobs will be
transferred and 182 machinist jobs will be abolished; and that we should
not resort to applicants' 1996/97
Labor Impact Exhibit, which projects that, although 173 machinist jobs will be
transferred, a net of 24
machinist jobs will be created.

Relief Requested: Denial Of Application. IAM claims: that
applicants have indicated that they
intend to abrogate Conrail's CBAs, and to impose, in lieu thereof, the CSX and
NS CBAs; that
applicants, though arguing that it is more efficient to administer fewer
agreements, have not established
that overrides are necessary to effectuate the transaction; and that applicants
should not be given blanket
authority to override entire CBAs for the mere sake of administrative
convenience. IAM claims that the
approach advocated by applicants would overturn established precedent, which
(IAM insists) provides:
that, where work is transferred, the CBA covering the receiving location is
applied to that work; and that,
in the absence of a transfer of work, the existing CBA should remain in
effect. IAM contends that,
because overrides of its Conrail CBAs would be unjustified and would severely
impair the rights of
IAM-represented employees, and also because the transaction contemplated by
applicants can be
expected to have a deleterious effect upon public safety in general and the
safety of rail labor in
particular, that transaction should not be approved.

Relief Requested: Labor Protective Conditions. IAM contends
that, if we approve the
CSX/NS/CR transaction, approval of the primary application should be made
subject to the New York
Dock conditions and approval of the related transactions should be made
subject to the Mendocino
Coast, Norfolk and Western, and Oregon Short Line conditions,
as appropriate.

Relief Requested: CBA Overrides. IAM contends: that, although
applicants have set forth
projected CBA changes, any issues regarding the modification or abrogation of
existing CBAs must first
be the subject of negotiation and arbitration pursuant to New York Dock,
Art. I, § 4; that it would be
premature for the Board to make, prior to the parties' exhaustion of the Art.
I, § 4 procedure, any findings
regarding the necessity of overriding CBA provisions to effectuate the
transaction; and that, for this
reason, issues regarding the modification or abrogation of existing CBAs are
not properly before the
Board at this time.

Relief Requested: Existing Protective Agreements. IAM notes that
applicants have confirmed:
that they do not propose to deny benefits under CSX's job stabilization
agreements or Conrail's SUB
Plan; and that they agree that protections under existing protective
arrangements are preserved by New
York Dock, Art. I, § 3. See CSX/NS-176 at 603. IAM
contends that any future application of the New
York Dock conditions should be consistent with these assurances.

RETIREES (ENGELHART, ET AL.). Nine Conrail retirees
(hereinafter referred to as the
Engelhart Retirees)(572) have raised issues
respecting Conrail's Supplemental Pension Plan (hereinafter
referred to as the Supp. Plan), an overfunded, contributory defined benefit
pension plan that is subject to,
and governed by, the Employee Retirement Income Security Act of 1974 (ERISA).
The Engelhart
Retirees, who claim to represent a class (hereinafter referred to as the
Retiree Class) consisting of all
similarly situated Conrail retirees who are participants in, or beneficiaries
of participants in, the
Supp. Plan, contend that they have: (i) an interest in maintaining
the financial integrity of the Supp.
Plan, in order to secure the benefits payable to them thereunder; and (ii) an
interest in securing a pro rata
share of the surplus assets of the Supp. Plan, to the extent that such surplus
is attributable to employee
contributions made either to the Supp. Plan itself and/or to certain
predecessor plans that were
maintained by Conrail's predecessors and that were merged into the Supp. Plan
after Conrail was created.

The Engelhart Retirees ask that we impose appropriate conditions to protect
the interests of
Supp. Plan participants in the Supp. Plan and its assets. The Engelhart
Retirees ask, in addition, that we
impose 12 specific conditions. These conditions: (1) would require applicants
to agree to the
post-transaction disposition of the Supp. Plan and its assets; (2) would
provide that, if the Supp. Plan is
to be amended, terminated, or merged into another plan, applicants must specify
how the interests of
Supp. Plan participants in the security of their pension rights and in the
Supp. Plan's surplus assets are to
be protected; (3) would require applicants to specify how the Supp. Plan
and its assets will be
administered post-transaction; (4) would require applicants to specify whether
Supp. Plan assets will be
used to provide severance benefits to employees of any applicant; (5) would
require applicants to amend
the Supp. Plan to provide adequate security for the pension benefits of the
Supp. Plan's participants; (6)
would require applicants to amend the Supp. Plan to determine the
interests of the participants in the
surplus assets, and would apparently provide that such surplus assets may not
be used for any purpose
other than the payment of benefits to the Retiree Class and the
Supp. Plan's present participants; (7)
would provide that, if the Supp. Plan is to be terminated or partially
terminated, applicants must allocate
and pay to the Retiree Class and the Supp. Plan's present participants their
equitable share of the Supp.
Plan's surplus assets; (8) would require applicants to amend the
Supp. Plan to provide for adequate
independent representation of the Supp. Plan's participants in the Supp.
Plan Administration Committee,
with appropriate arrangements for the selection, compensation, and
reimbursement of expenses for such
participants' representation; (9) would require that all commitments and
agreements made by applicants
shall be legally binding upon applicants and their successors and assigns, and
shall be for the benefit of
the Retiree Class and the participants and their beneficiaries; (10) would
permit the Retiree Class to
conduct all necessary discovery of applicants relating to the disposition of
the Supp. Plan; (11) would
require applicants to pay all legal costs and expenses, including reasonable
counsel fees and expenses for
the Retiree Class; and (12) would reserve to the Retiree Class the right to
request further conditions,
depending upon any post-brief pleadings filed in this proceeding.(573)

TRANSPORTATIONCOMMUNICATIONS INTERNATIONAL UNION. TCU
contends
that we should deny the CSX/NS/CR application. TCU further contends that, if
we do not deny the
application, we should impose the New York Dock conditions and grant the
additional relief described
below.

Relief Requested: Enhancements. TCU contends: that, since the
mid-1970s, the sacrifices
Conrail's unionized employees have made have played a crucial role in Conrail's
financial recovery; that,
however, these employees stand to lose the most from this transaction, while
Conrail's upper and middle
management will cash out with generous severance and dislocation packages; and
that, in these
circumstances, a truly "fair arrangement" requires enhanced New York
Dock protection. The specific
enhancements sought by TCU: (1) would grant attrition protection to any
employee who faces dismissal
as a result of the CSX/NS/CR transaction;(574)
and (2) would provide that any employee whose work is
transferred as a result of the CSX/NS/CR transaction will not be compelled to
follow that work without
being offered the alternative option of receiving a separation allowance
comparable in value to those
offered Conrail's management employees.(575)

Relief Requested: NS' Appendix A (CBA Overrides). TCU insists
that NS should not be given
the right to override the existing Conrail CBAs and to impose, in lieu thereof,
NS' own CBAs. See
CSX/NS-20, Volume 3B at 354-98 (NS' "Appendix A" description of the
coordinations and transfers of
work that NS claims will be necessary). TCU argues that an override of an
entire CBA would be
unprecedented, and that the efficiencies that NS assertedly could realize if it
were able to administer only
one CBA per craft are illusory and/or insufficient. TCU claims: that an
override that had the effect of
expanding the seniority districts of clerical employees would place on these
employees relocation
burdens not contemplated by, and indeed contrary to, New York Dock; and
that an override intended to
secure, for carmen employees, more restrictive point seniority, as opposed to
the Conrail system of
combined point seniority and prior rights, would, by terminating these prior
rights, create significant
inequities among Conrail carmen. TCU, which asks that we reject NS' claim that
NS, as the acquiring
carrier, can override and replace all existing Conrail CBAs, insists: that the
practice followed in prior
cases should be followed here; that, as in prior cases, this will allow work to
be transferred between
locations on the merging carriers under New York Dock implementing
agreements; that this will mean
that, when work is transferred, the agreement at the receiving location will
generally apply; that,
therefore, employees who transfer to follow their work will be covered by the
CBA in effect at the
location receiving the work; and that, in accordance with prior practice, the
existing CBAs will remain in
effect at the locations at which they presently apply.

Relief Requested: CSX's Appendix A (Transfer Of Seniority Of Conrail
Clerical Employees To
Jacksonville Rosters). TCU claims that CSX has indicated: that it
intends to transfer major clerical
functions from Conrail locations to a CSX location (Jacksonville, FL) and to
form five consolidated
seniority districts; and that, although not all of the affected employees will
be needed to follow their
work, the seniority of all such employees will be transferred to a Jacksonville
roster. See CSX/NS-20,
Volume 3A at 485-519 (CSX's "Appendix A" description of the changes that CSX
claims will be
required to implement its Operating Plan). TCU contends: that an employee who
is "not needed" at the
time his/her work is consolidated in Jacksonville will become a "dismissed"
employee under New York
Dock, unless he/she is able to hold a position in his/her original Conrail
seniority district; and that, as a
practical matter, few if any of the affected clerical employees will be able to
hold a position in their
original Conrail seniority districts. TCU further contends: that, under
New York Dock, a "dismissed"
employee is entitled to draw a dismissal allowance; that, however, as a
condition of drawing protection
he/she must accept available work in his/her original seniority district or
comparable work in other
crafts, which does not require relocation; and that CSX, by transferring the
seniority of "dismissed"
employees to Jacksonville without offering positions at the time of such
transfer, intends that any such
employee will be required to accept future available work in Jacksonville or
forfeit his/her dismissal
allowance. TCU insists that the transfer of an employee's seniority without
offering the employee an
opportunity to follow the transferred work at the time of the transfer of such
work is unprecedented, and:
would circumvent recent arbitration and ICC/STB decisions, see TCU-6 at
16-17 and TCU-15 at 31;
would markedly change New York Dock protections by significantly
expanding employee responsibility
to relocate; and would raise significant equity issues for Conrail and CSX
employees as to whether such
transferred seniority should be dovetailed or endtailed under the circumstances
present here. TCU
therefore asks that we reject CSX's proposal to transfer to CSX's Jacksonville
rosters the seniority of
"dismissed" Conrail employees (i.e., Conrail employees who, as a result of a
work transfer, will not be
needed at the time of the work transfer).

Relief Requested: CSX's Appendix A (Proposal To Establish A Single
Clerical Field Seniority
District And To Apply The Conrail CBA To All Locations Therein). CSX
intends to combine into one
clerical field district the clerical field districts on the CSX-allocated
portions of Conrail and on the
adjacent portions of CSX, and to apply the Conrail CBA to all locations in this
clerical field district. See
CSX/NS-20, Volume 3A at 500; CSX/NS-177, Volume 2B at 30-31. TCU
contends: that the geographic
scope of the district contemplated by CSX is likely to impose significant
relocation burdens on clerical
employees; that TCU has never entered an implementing agreement calling for
such a massive
consolidation of seniority rosters on acquiring and acquired carriers,
particularly in the absence of work
transfers;(576) and that CSX's unprecedented
proposal is supported neither by arbitration awards nor by
ICC/STB decisions.

(1) TCU asks that we reject CSX's proposal to establish a single clerical
field district. TCU
claims: that CSX has not suggested how a merging of seniority rosters would
cure any barrier in
assigning work among employees in the new district; that CSX has not pointed to
a single seniority or
other rule that would have to be overridden to permit such assignments; that,
because the seniority rules
applicable to clerical employees do not restrict the clerical work an employee
can perform, CSX clerical
employees will be able to perform, under current seniority rules, any Conrail
work transferred to CSX
facilities; and that assignments of clerical work, particularly those that do
not require the transfer of
clerical employees, are routinely accomplished under New York Dock
procedures without disturbing
existing seniority districts.

(2) TCU contends that, if we do not reject CSX's proposal to establish a
single clerical field
district, we should at the very least reject CSX's proposal to override the
applicable CSX CBA and to
impose, in lieu thereof, the applicable Conrail CBA. TCU argues: that the
practice generally followed in
prior mergers should be followed here; that, absent a transfer of work, both
CBAs should continue in
effect at the locations at which they previously applied; and that, therefore,
CSX clerks who remain at
their pre-transaction CSX locations should continue to be covered by the CSX
CBA.

Relief Requested: Confirm Applicants' Representations Respecting Job
Stabilization Agreements
And Supplemental Benefit Plan. TCU has asked for relief concerning
certain CSX-TCU job stabilization
agreements and also concerning the Conrail Supplemental Benefit Plan (SUB
Plan). As respects the
CSX-TCU job stabilization agreements, TCU contends that CSX employees in the
field seniority district
furloughed because of a reduction in force will be entitled to protection under
these agreements, which
provide furloughed employees what TCU calls "attrition protection" (by which
TCU means that these
agreements provide protection regardless of nexus to any transaction). As
respects the SUB Plan, TCU
contends: that Conrail employees are covered by this plan, which provides up
to $40,000 in lifetime
protection for furloughed employees; and that an employee need not show a
connection to any particular
transaction to receive SUB Plan benefits, which may be available in situations
in which job stabilization
benefits would not be available.(577) TCU,
which was initially under the impression that CSX intended to
impose a nexus requirement upon job stabilization benefits and to apply the SUB
Plan only in those
instances in which CSX intended to apply the Conrail CBA, and that NS did not
intend to apply the SUB
Plan at all, asked, in its TCU-6 comments, that we clarify that employees
covered by on-property job
stabilization benefits or Conrail SUB Plan benefits would be fully protected
from the loss of such
benefits under New York Dock, Art. I, § 3.

Applicants, however, have since confirmed that they are not proposing to
deny benefits under
CSX's job stabilization agreements or Conrail's SUB Plan, and have indicated
that they agree that
protections under existing protective arrangements are preserved by New York
Dock, Art. I, § 3. See
CSX/NS-176 at 603. Seealso NS-62 at 42 n.39 (NS concedes that
Conrail employees will have the right
to elect coverage under the SUB Plan in accordance with New York
Dock, Art. I, § 3).(578) TCU has
advised that it takes these assurances to mean that employees covered by job
stabilization agreements or
the SUB Plan or subsequently bargained stabilization agreements may elect
protection under those
agreements if adversely affected, even though they may be working under
different CBAs as a result of
the CSX/NS/CR transaction. TCU asks that we clarify: that any application of
the New York Dock
conditions should be consistent with the assurances provided by applicants at
CSX/NS-176 at 603; and
that affected employees will be covered by New York Dock, Art. I, §
3, so as not to lose Feb. 7, SUB, or
other on-property protections.

Relief Requested: Safety. TCU contends: that any approval of
the CSX/NS/CR application
should be conditioned on the implementation of a safety plan devised or
approved by FRA; that FRA
should have responsibility for oversight and monitoring to assure compliance
with that plan; that all
unions, including TCU, should have an opportunity to comment on any safety plan
to FRA and to
participate fully in the process of adopting appropriate safety standards; and
that there should be close
oversight by the Board and FRA of the post-transaction operations of CSX and NS.

TRANSPORTATION TRADES DEPARTMENT. The Transportation
Trades Department,
AFL-CIO (TTD), which consists of unions representing millions of workers in the
transportation
industry, argues that, if the CSX/NS/CR transaction is approved, thousands of
workers will lose their
jobs, thousands more will be forced to move, CBAs will be unilaterally
abrogated, safety will be
jeopardized, and efficient, reliable, and competitive rail service will be
threatened. TTD adds: that
applicants have not stated any compelling reason why this transaction needs to
occur; and that the
anticipated harms to applicants' employees will not be adequately mitigated by
New York Dock
benefits.(579) The CSX/NS/CR transaction, TTD
therefore insists, is contrary to the public interest and
should not be approved.

UNION LOCALS. Charles D. Bolam, General Chairman for the
United Transportation Union-General Committee of Adjustment (UTU-GCA) on The
Alton & Southern Railway Company (A&S),
and Vice President of the St. Louis Rail Labor Coalition, urges denial of the
CSX/NS/CR application
which, he claims, will result in yard closings and line abandonments, will have
an adverse impact on rail
employees, and will compromise safety as more rail cars are moved in
increasingly congested
corridors.(580)

John H. Burner, UTU's Assistant Illinois Legislative Director, urges denial
of the CSX/NS/CR
application. Mr. Burner contends: that the operational changes in Illinois
would be dramatic; that the
proposed changes for the Chicago area are particularly disturbing, because
applicants seek to divert
traffic away from the Chicago gateway; and that the impact upon competition,
rail services, and rail
employees will be adverse.

John D. Fitzgerald, General Chairman for the UTU-GCA for certain BNSF lines
in the Pacific
Northwest, urges denial of the CSX/NS/CR application. Mr. Fitzgerald
contends: that the problems the
CSX/NS/CR transaction will create in the East will be similar to, and will
exacerbate, the existing
problems in the West; and that the exacerbation of the existing problems in the
West will have an
adverse impact upon BNSF employees.

John F. Collins, BLE's New York State Legislative Chairman, urging
rejection of the
CSX/NS/CR transaction, contends: that CSX and NS, lacking sufficient
personnel, will only be able to
service their debt by raising rates and cutting employees; that, as this
process plays itself out, thousands
of jobs will be lost; that, furthermore, CSX and NS will spin off or abandon
assertedly marginal lines;
and that rail service will deteriorate as the transaction is implemented. Mr.
Collins adds: that CSX and
NS will use the Art. I, § 4 process to subvert the RLA and to gain through
administrative fiat goals they
cannot achieve in the collective bargaining process; and that the income
protection provided by New
York Dock will be illusory (CSX and NS, he warns, will assert that job
losses are due to "economic
conditions" and not to the transaction, and, as in past cases, employees and/or
their unions will be unable
to disprove this claim).(581)

Angelo J. Chick, Jr., Chairman of the Local Grievance Committee for BLE
Division 227,
contends: that CSX's "Northern District" will be composed entirely of former
Conrail lines and former
Conrail employees; that the Conrail CBAs are more than adequate to give CSX the
latitude to establish
any service that might be envisioned; and that we should therefore require that
any Northern District
seniority system recognize the equities, rights, prior rights, and prior-prior
rights that exist today under
the applicable Conrail CBA.

Samuel J. Nasca, UTU's New York State Legislative Board Legislative
Director/Chairperson,
expressing conditional opposition to the CSX/NS/CR transaction, contends: that
many UTU-represented
employees and their families will be uprooted and displaced to distant
locations; that Conrail's already
overworked employees will be asked to do even more with less; and that the
consolidation of dispatching
forces far from the dispatched territories will create safety problems by
exacerbating the potential for
dispatcher error. Mr. Nasca adds that, because UTU-represented D&H
employees will be adversely
affected when NS acquires Conrail's Southern Tier line and uses NS crews in
place of D&H crews, we
should impose labor protective conditions to protect the D&H employees.

UNITED RAILWAY SUPERVISORS ASSOCIATION. URSA claims:
that CSX and NS
have indicated that, except as respects the SAAs, they intend to abrogate
URSA's Conrail CBAs; that NS
intends to make all URSA-represented employees non-agreement employees; that
CSX intends to make
some URSA-represented employees non-agreement employees, and to substitute the
American Railway
and Airway Supervisors Association (ARASA) as the representative for other
URSA-represented
employees; and that, in this manner, applicants intend to disregard National
Mediation Board (NMB)
certifications issued to URSA under the RLA, and to circumvent the NMB's
exclusive jurisdiction to
determine representational questions involving rail carriers. URSA contends
that, because the CBA
overrides CSX and NS seek would adversely impact URSA-represented employees and
would violate the
RLA, the CSX/NS/CR transaction should not be approved. URSA further contends
that the CSX/NS/CR
transaction can be expected to have a deleterious effect upon public safety in
general and the safety of
rail labor in particular, and, for these reasons also, should not be approved.

Relief Requested: Labor Protective Conditions. URSA contends
that, if we approve the
CSX/NS/CR transaction, approval of the primary application should be made
subject to the New York
Dock conditions and approval of the related transactions should be made
subject to the Mendocino
Coast, Norfolk and Western, and Oregon Short Line conditions,
as appropriate.

Relief Requested: CBA Overrides. URSA contends: that, although
applicants have set forth
projected CBA changes, any issues regarding the modification or abrogation of
existing CBAs must first
be the subject of negotiation and arbitration pursuant to New York Dock,
Art. I, § 4; that it would be
premature for the Board to make, prior to the parties' exhaustion of the Art.
I, § 4 procedure, any findings
regarding the necessity of overriding CBA provisions to effectuate the
transaction; and that, for this
reason, issues regarding the modification or abrogation of existing CBAs are
not properly before the
Board at this time.

Subsequent Filings. By letter dated March 17, 1998, an URSA
general chairman (Lawrence M.
Daugherty) advised that his general committee, having reached an implementing
agreement with
applicants, now supports approval of the transaction. By letter dated April 2,
1998, four URSA general
chairmen (W. P. Hernan, Jr., R. A. Kerr, A. J. Mazzarella, and
B. E. Hedges) advised that URSA has
reached an implementing agreement with applicants and that their membership now
supports approval of
the transaction.

UNITED TRANSPORTATION UNION. UTU contends: that the
CSX/NS/CR transaction
will create two strong rail networks that will compete vigorously throughout
the Eastern United States;
that this will be in the best long-term interests of rail labor, and will
create the possibility of long-term
job growth; that the immediate adverse job impact that UTU members will
experience will be
ameliorated by certain conditions to which applicants have committed; and that,
for these reasons (and
particularly on account of the commitments applicants have made), UTU supports
the CSX/NS/CR
transaction(582) and asks that we condition
approval of the transaction upon applicants' commitments.

(1) CSX, NS, and Conrail have committed: (a) to grant automatic
certification as adversely
affected by the transaction to the 461 train service employees and the 25
UTU-represented yardmasters
projected to be adversely affected in the Labor Impact Exhibit and to all other
train service employees
and UTU-represented yardmasters and hostlers identified in the service of any
Section 4 notice; (b) to
grant automatic certification to any engineers adversely affected by the
transaction who are working on
properties where engineers are represented by UTU; and (c) to supply UTU with
the names and TPA's of
such employees as soon as possible upon implementation of the transaction.

(2) CSX, NS, and Conrail have committed to the foregoing on the basis of
UTU's agreement to
utilize its best efforts to negotiate agreements implementing the Operating
Plans and the related
Appendices A's before the date that the transaction is orally approved by the
Board, contingent on Board
approval. Applicants and UTU have agreed: that, if implementing agreements
have not been reached
prior to the Board's approval, the parties will meet within 5 days of such date
in an effort to conclude the
necessary agreements; that, should the parties fail to reach agreement,
arbitration will commence within
10 days of receipt of the Board's written decision; and that, to facilitate
arbitration, the parties will either
agree on an arbitrator or arrange for the immediate appointment of an
arbitrator by the NMB, and will
schedule the arbitration hearing for as soon as practicable after the
anticipated approval date.

(3) CSX and NS have committed that, in any notice served in this
transaction, CSX and NS will
propose only those changes to existing CBAs that are necessary to implement the
proposed transaction,
by which is meant changes that are necessary to implement operational changes
that will produce a
public transportation benefit not based solely on savings achieved by agreement
changes.(583)

(4) CSX, NS, and Conrail have further committed that, if at any time UTU's
International
President or his representative believes that the application of the New
York Dock conditions by CSX,
NS, or Conrail is inconsistent with applicants' commitments, UTU and CSX, NS,
or Conrail personnel
will meet within 5 days of notice from the UTU International President or his
representative and agree to
expedited arbitration pursuant to the New York Dock conditions with a
written agreement within 10 days
after the initial meeting if the matter is not resolved, which agreement will
contain, among other things,
the full description for neutral selection, timing of hearing, and time of
issuance of Award(s).

(5a) With regard to rights eligible UTU-represented Conrail employees have
respecting
"flowback" opportunities to and/or from Amtrak pursuant to Section 1165 of the
Northeast Rail Service
Act of 1981 (NERSA), CSX, NS, and Conrail have committed that these rights,
subject to their terms and
conditions, will continue to be available to eligible Conrail employees if they
either continue coverage
under the Conrail-UTU CBA or become subject to coverage under either the CSX or
NS CBAs as a
consequence of STB Finance Docket No. 33388.

(5b) With regard to rights eligible UTU-represented employees have from
Metro-North
Commuter Railroad Company (MNCR) and New Jersey Transit Rail Operations, Inc.
(NJTRO),
respecting remaining one-time flowback opportunities to Conrail pursuant to
NERSA Section 1145,
CSX, NS, and Conrail have committed that these rights, subject to their terms
and conditions, will
continue to be available to such eligible commuter authority employees to
either Conrail (in SAAs), NS,
or CSX as the seniority provisions with UTU may indicate, upon the approval and
implementation of
STB Finance Docket No. 33388.

(5c) With regard to rights eligible UTU-represented Amtrak yardmaster
employees have from
Conrail regarding remaining one-time flowback opportunities to Conrail if they
are "deprived of
employment" on Amtrak pursuant to and as defined in letters of agreement dated
December 8, 1982,
May 3, 1984, and April 4, 1986, applicants have apparently committed(584) that these rights, subject to their
terms and conditions, will continue to be available to such Amtrak employees to
either Conrail (in
SAAs), NS, or CSX as the seniority provisions with UTU may indicate, upon the
approval and
implementation of STB Finance Docket No. 33388.

(6) Regarding the use of leases and/or trackage rights to implement the
CSX/NS/CR transaction,
CSX, NS, and Conrail have committed to reach an implementing agreement to
effectuate the transaction
as described in the CSX, NS, and SAA 3-year Operating Plans under the New
York Dock conditions.(585)

D&H Labor Protection. UTU contends: that, in three specific
corridors (Binghamton, NY-Buffalo, NY; Binghamton, NY-Montreal, PQ; and
Binghamton, NY-Allentown/Philadelphia, PA), D&H
handles overhead traffic for CSX and NS; that, in the Binghamton-Buffalo
corridor, D&H operates via
trackage rights over Conrail's Southern Tier line; that, because this line will
be allocated to NS, it is
obvious that, post-transaction, NS will operate the relevant trains itself,
with NS crews; and that, in
consequence, UTU-represented D&H employees on these trains will be
adversely affected by the
CSX/NS/CR transaction. UTU therefore asks that we impose labor protective
conditions (either New
York Dock or Mendocino Coast) to protect the D&H employees. UTU
contends that, although
employees of third-party carriers generally do not receive labor protection as
a result of merger or
control transactions, protection is warranted here because the D&H
situation presents a unique factual
circumstance, in that NS is acquiring territory over which D&H has trackage
rights.

APPENDIX M: FEDERAL PARTIES

UNITED STATES DEPARTMENT OF AGRICULTURE. USDA indicates:
that the
anticompetitive effects likely to flow from the CSX/NS/CR transaction are
neither large nor widespread;
that, in fact, the transaction may promote competition by breaking up Conrail's
"monopoly" in the
Northeast and by creating new single-line service options for agricultural
shippers moving eastern
Cornbelt grain and feed products to a number of markets; and that, for these
reasons, USDA, though it
does not support the transaction, does not oppose it either. USDA suggests,
however, that, if we approve
the transaction, we should: (1) adopt a "go-slow" approach to implementation;
and (2) grant ISRR
access to Indianapolis, in order to maintain intramodal competition in the
greater Indianapolis region.